What a Surprise, Wall Street's S&P 500 Price Targets Are Starting to Come Down
It seems others are finally coming around to our line of thinking. Here's where our radar is tuned now.
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We’ve been vocal critics of 2025 consensus EPS expectations, pointing out aggressive projections for more than 9% sequential improvement in Q2 2025 and the 14% growth in H2 2025 compared to H1 2025. While factors, such as potential Trump tax reform, could occur that help goose H2 2025 EPS growth expectations, that’s not in the cards for the June-quarter guidance we’ll be getting in the coming weeks.
There is no reason for companies to be heroes when it comes to delivering their outlook for the June quarter given the number of headwinds that are blowing. To make sure we are on the same page, those include tariff uncertainty that has pushed larger business uncertainty to near-record levels, inflation pressures, and softening consumer spending.
Well, it would seem that others on Wall Street are coming around to realizing this.
Goldman Sachs GS cut its 2025 S&P 500 target to 6200 from 6500, while Barclays slashed its to 5900 from 6600. Factoring in the potential impact of tariffs both on economic activity and corporate bottom lines, Barclays also reduced its 2025 S&P 500 EPS forecast to $262 from $271. That implies a P/E multiple of 22.5x to get Barclay's revised target, which is not too far off the peak multiple for this year, but much higher than the average peak of 19.7x for the 2000-2024 time frame and the 21.4x average for the 10-year period between 2015-2024.
We expect other Wall Street firms will dial back their 2025 expectations for the S&P 500, but we also recognize the potential for greater insight as to the degree of those potential cuts as we move past next week’s Trump tariff day. As mentioned above, successful efforts by the Trump administration on tax reform would require updating the EPS calculus for H2 2025.
Still, given our comments above about the downside risk to June-quarter guidance, we’ll continue to watch for negative earnings pre-announcements leading up to the start of the March-quarter earnings season. Should we get such announcements — and we think the odds are good that we do — we’ll connect the corresponding dots and make any moves required with TheStreet Pro Portfolio.
