Jefferies: The target price of the S&P 500 index at the end of 2026, profit growth of 8,000 points is still underestimated by the market

The Zhitong Finance App learned that Jefferies published a research report stating that they are optimistic about the S&P 500 index and expect the target price to be 8,000 points by the end of 2026 and 9,000 points by the end of 2027. The bank believes that the strong profit growth story is still undervalued by the market, and subsequent profit improvements are expected to push the index further higher.

Jefferies said that the 2026 target of 8,000 points for the S&P 500 is based on a profit of 373 US dollars per share and a price-earnings ratio of 21.5 times. The 2027 benchmark scenario assumes a profit of 450 US dollars per share, corresponding to the target of 9,000 points and a price-earnings ratio of 20 times the price-earnings ratio. The bank pointed out that due to strong profit growth that continues to exceed expectations and supported by artificial intelligence driven investment, the profit prospects for US stocks are still positive. Although oil prices, inflation, and rising 10-year US Treasury yields may reduce valuation multiples, this should not offset the strong earnings growth story.

The bank pointed out that the key risk is a significant slowdown in profits, particularly among AI-related companies, which are still the main growth engine of the market. The bank believes that profit expectations are still undervalued by the market. After a strong second quarter results period and positive management comments, it sees room for further revisions until 2028. Although the revision may slow down, profit expectations are not expected to more than double from the beginning of the year, as in 2026.

Jefferies believes that the profit story is still centered around artificial intelligence, but it is no longer just a story about the “Big Seven in Technology.” The market now expects S&P 500 profits to increase 29% in 2026, a sharp increase from about 13% at the beginning of the year. Although the tech giants still expect profit growth of 45%, earnings expectations for the rest of the S&P 500 have also substantially improved, with growth forecasts rising to about 24%. The bank estimates that about 46% of the index has direct or indirect exposure to AI and data center spending. These companies expect profit growth of 60% this year and decelerate to 24% in 2027.