To The Moon

Analysts had the Most Buy Ratings on Stocks for Over a Decade, with Optimistic Target Price Estimates.

According to new data from FactSet, analysts had the most Buy ratings on stocks in the S&P 500 as a percentage of their total ratings during February and March in over a decade.

As of March 31, Of 10,821 ratings on companies tracked by the benchmark, 57.3% had an investment analyst recommendation to purchase their stock, slightly trailing February at 57.4%. And 37.1% were Hold ratings, and 5.6% were Sell ratings.

Over the past five years, the average (month-end) percentage of Buy ratings is 52.9%, the average (month-end) percentage of Hold ratings is 41.1%, and the average (month-end) percentage of Sell ratings is 6.0%.

Prior to the surge, the last time the percentage of Buy ratings exceeded 55% at the end of any month was September 2011, at 55.8%, the firm found.

The optimistic outlook was likely driven by an increase over the past several months in earnings estimates for S&P 500 companies, FactSet's John Butters points out.

Analysts are Most Optimistic on the Energy

At the sector level, analysts are most optimistic on the Energy (66%), Information Technology (64%), and Communication Services (62%) sectors, as these three sectors had the highest percentages of Buy ratings on March 31.

On the other hand, analysts are most pessimistic on the Consumer Staples (41%) and Utilities (49%) sectors, as these two sectors had the lowest percentage of Buy ratings on March 31. The Consumer Staples sector also had the highest percentage of Hold ratings (48%) and the highest percentage of Sell ratings (11%) on this date.

Highest % of Buy Ratings in S&P 500: Top 10 (Source: FactSet)

$Signature Bank(SBNY)$ ,$Alexandria Real Estate Equities(ARE)$ ,$Assurant Inc(AIZN)$ ,$Alphabet(GOOG)$ ,$Alphabet(GOOGL)$ ,$Amazon.com(AMZN)$ ,$IQVIA(IQV)$ ,$Caesars Entertainment(CZR)$ ,$Alaska Air(ALK)$ .

Analysts are also optimistic in their target price estimates, as they currently believe the price of the index will increase by more than 16% (to 5282.93) over the next 12 months.

Expected Price Increases by Sector

At the sector level, the Communication Services (+27.9%), Consumer Discretionary (+21.1%), and Information Technology (+19.9%) sectors are expected to see the largest price increases, as these three sectors had the largest upside differences between the bottom-up target price and the closing price on March 24.

On the other hand, the Energy (+4.5%) and Utilities (+5.0%) sectors are expected to see the smallest price increases, as these two sectors had the smallest upside differences between the bottom-up target price and the closing price on March 24.

Top 10 List According to the Difference Between Median Target Price & Closing Price: $General Motors(GM)$ ,$Bath & Body Works Inc.(BBWI)$ , $PayPal(PYPL)$ ,$Under Armour(UA)$ ,$Stanley Black & Decker(SWK)$ ,$DISH Network Corp. Rights(DISHR)$ ,$Whirlpool(WHR)$ ,$D.R. Horton(DHI)$ ,$PVH Corp(PVH)$ ,$Fortune Brands Home & Security(FBHS)$ .

How Accurate Have Industry Analysts Been in Predicting the Future Value of the S&P 500?

In recent periods, industry analysts have underestimated the closing price of the index 12 months later. Over the past 5 years, Industry analysts have underestimated the price of the index by 2.8% on average. Over the past 10 years, industry analysts have underestimated the price of the index by 0.1% on average.

Disclaimer: 

This post is for informational purposes only, does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.