The S&P/TSX Composite Index rose 8 per cent in 2023, driven by a strong broad-based year-end rally. During the final two months of the year, the TSX surged 11 per cent with 10 of the 11 sectors realizing gains. The energy sector was the lone detractor to performance.
Looking ahead, the positive price momentum is expected to continue in 2024. Of the 225 securities in the S&P/TSX Composite Index, only 11 stocks are viewed as fully valued with negative price returns forecast by the Street in the new year.
Bank stocks are notable outliers. Shares of Bank of Montreal, CIBC and Scotiabank all have negative price returns expected in 2024. Meanwhile, shares of TD Bank, Royal Bank and National Bank are anticipated to rise in value by 3 per cent or less based on the average target prices.
Later this month, the fourth-quarter earnings season is set to kick off. It will be interesting to see if analysts’ optimism for stocks will be supported by sales and earnings growth as well as management outlooks.
This report includes a link to a list of analysts’ target prices, recommendations, forecast returns and yields for all securities in the S&P/TSX Composite Index grouped by sector and ranked according to their expected price returns (excluding dividend and distribution income). The posted target price for each security is an average of all available target prices from analysts. A target price typically reflects an expected share or unit price 12 months from now based on an analyst’s financial modelling, such as a discounted cash flow or sum-of-the-parts model. For the yield provided, Bloomberg calculates this figure by annualizing the most recent announced dividend or distribution value.
It’s important to note that high target prices, which imply stellar returns that seem unbelievable may be just that - unrealistic. At times, when a stock price falls analysts may maintain their bullish expectations, inflating the forecast return. In addition, an outlier (extreme target price) can skew the average target price, to the upside or downside, particularly when the number of analysts covering a stock is low. Don’t let a huge projected gain lure you into a position – it is critical to look at the company and industry fundamentals.