Rising Earnings Expectations Could Make It Harder for Companies To Wow Investors

As earnings season approaches, Citi Research analysts warned precocious expectations could make it harder for companies to impressment investors, contributing to marketplace volatility.

Earnings play is set to footwear off later this week, pinch banks including JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) reporting results connected Friday.

Meeting Estimates May Not Be Enough To Satisfy Investors

"Given nan lofty implied maturation expectations, markets apt request to spot raises coupled pinch coagulated execution driven thumps to prolong caller gains aliases push higher from here," Citi analysts said.

The analysts noted that "while basal trends are affirmative and statement estimates are attainable, valuations propose nan buy-side will request more."

Hiking S&P 500 Targets Ahead of Earnings

Citi analysts lifted their year-end S&P 500 target to 5,600 pinch earnings per stock (EPS) of $270, saying they "expect valuations to clasp into year-end but compress successful nan twelvemonth ahead."

Oppenheimer analysts besides raised their value nonsubjective for nan scale to 5,900 pinch EPS astatine $255.

The analysts noted that "some adjacent word profit-taking successful nan time to time action of nan marketplace peculiarly successful segments of nan marketplace that person had exceptional run-ups since past twelvemonth into this twelvemonth should beryllium expected." They added that volatility could connection investors an opportunity for investors to bargain astatine a little price.

AI To Take Center Stage

The analysts besides said they expect artificial intelligence (AI) will proceed to beryllium a apical theme successful upcoming net reports.

"Markets are reasonably pricing premium maturation expectations for Artificial Intelligence," Citi analysts said, though they noted "pockets of interest propose utilizing basal overlays."