Multiple financial firms have revised their S&P 500 price targets upward, citing stronger-than-expected earnings per share (EPS) and valuation expectations.
Fundstrat Global Advisors
Fundstrat Global Advisors, led by Tom Lee, increased its year-end S&P 500 target to 8,000 from 7,700.
The revision is driven primarily by higher EPS expectations for 2027, rather than by valuation expansion.
The firm maintains a lower target price-to-earnings (P/E) multiple but expects P/E multiples to expand over time.
Key Drivers
The firm identified the following factors as drivers of earnings and economic growth:
- Artificial intelligence
- Energy infrastructure
- Onshoring
- Blockchain adoption
Cautions
Lee cautioned that the path to 8,000 may be volatile. He identified three potential tests anticipated later in the year:
- A new Federal Reserve leadership team being tested.
- A potential IPO unlock of companies such as SpaceX and Anthropic.
- A risk of petroleum product shortages from the Iran conflict.
Portfolio Recommendations
Preferred sectors: Technology, financials, industrials, small-cap stocks, energy/basic materials.
Top 5 large-cap picks: The firm added Caterpillar; existing picks include Advanced Micro Devices, Arista Networks, Goldman Sachs, and Quanta Services.
Bottom 5 large-cap picks: Northrop Grumman, Palantir Technologies, MicroStrategy, EchoStar, Texas Pacific Land.
Small/mid-cap recommendations: The firm added Valmont Industries and Mueller Industries to its preferred list and advised avoiding Weatherford International and AeroVironment.
RBC Capital Markets
RBC Capital Markets increased its S&P 500 12-month price target by 250 points to 8,150. This target implies a 10.8% upside from the previous week's close.
Head of U.S. equity strategy Lori Calvasina stated the revision is driven by stronger earnings per share and valuation expectations.
Calvasina assumes a trailing four-quarter EPS of $337 in Q1 2026.
Risks and Outlook
Calvasina noted potential volatility due to possible Federal Reserve rate hikes. According to the firm, fed funds futures indicate a 64% probability of a rate increase at the September meeting.
However, Calvasina's team has "less concern" than a month ago, citing potential benefits from lower oil prices and inflation. If recession fears stay low and the Fed implements moderate rate hikes, Calvasina expects pullbacks of 5%-10%.
Context
According to data tracked by CNBC Pro, the average strategist target for year-end 2025 is 7,807, approximately 4% below Calvasina's 12-month forecast.
The S&P 500 has risen over 8% in 2026 and is on track for a fourth consecutive yearly gain.