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What’s Your Target?

Posted November 15, 2021 at 10:00 am
Adam Johnson
Bullseye Brief

S&P 500 companies are reporting significantly better than expected Q3 results.

On average, earnings are beating estimates by 10%, powered by growth of 40% YoY. While I recognize that any comparison to last year may seem absurd… since that was the depth of lockdowns… the magnitude of the beat is still spectacular. I think current full year earnings estimates of $207 are too low, and I think consensus of $220 for next year won’t even be in the ballpark. 

Former I.I. #1 auto analyst Nick Colas and I debated this issue recently

We think next year could reach $240. If that’s the case, then the market is trading at a forward P/E of 19.6x (4,700 / $240)… elevated but not crazy. With interest rates likely to remain relatively low into 2022/3, and real rates likely to remain negative even if the Fed hikes three times next year, I think a 20-ish multiple is reasonable. 

The fly in the ointment is inflation

I’m with Yellen and Powell on that one… supply chains will normalize and cost pressures will abate. Low rates, low inflation, low unemployment, high growth. What’s YOUR target for the S&P 500?

S&P 500

As of 11/15/21, the author holds positions in:

Allakos, Inc., Applied Therapeutics, Arconic Corp., BioDelivery Int’l, Inc., Boeing Company, Boston Properties, Inc., CVS Health Corp. , Energy Transfer LP, Evofem Biosciences, Inc., Herman Miller, Inc., Inovalon, Inc., Iveric Bio, Inc., JAMF Holding, Inc., L3Harris Technologies, LifeSci Acquisition II Corp, Neoleukin, Nine Meters Biopharma, Nutanix, Inc., OMC Group, Inc., Ontrak, Inc., Progenity, Inc., Progyny, Inc., Rapt Therapeutics, Inc., Shift Technologies, Inc., SmileDirectClub, Inc., SOC, Telemed, Inc., Teladoc Health Inc., The RealReal, Inc., Trillium Therapeutics, Velodyne, Inc., Wynn Resorts, Ltd., Workhorse, Halliburton, NXP Semiconductors

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