Goldman's Cohen Cuts Targets on S&P, Dow
Wednesday April 18, 10:18 am Eastern Time
<<NEW YORK (Reuters) - Goldman Sach's chief investment strategist, Abby Joseph Cohen, cut her year-end price targets for two major U.S. indices on Wednesday as she reduced corporate profit expectations, but is still bullish on stocks. Cohen dropped her profit forecast because of ``muted economic expectations'' for 2001.
In her annual spring note to clients, Cohen cut the Standard & Poor's 500 Index (.SPX) year-end target to 1,550 from 1,650, and reduced the Dow Jones industrial average (.DJI) target to 12,500 from 13,000.
Still that would be a 30 percent jump for the S&P 500 from where it closed at 1,191.81 on Tuesday, and a 22 percent gain for the Dow average. Cohen's rolling 12-month S&P 500 year-end price target is 1600.
``Even with moderately reduced profit forecasts, stocks are notably undervalued and offer sizeable potential returns in the coming months,'' Cohen said in a note to clients. ``We do not expect an intractable recession, and expect profit growth to reaccelerate in the second half of 2001.''
Cohen left her asset allocation unchanged at stocks 70 percent, bonds 27 percent and commodities 3 percent.
Cohen also cut her 2001 earnings per share outlook for companies in the Standard & Poor's 500 index to $56.50 from $60. She introduced her 2002 S&P 500 operating profit forecast of $61.50, a projected gain of 9 percent above the revised expectation for 2001.
``A key point is that profit deceleration began six quarters ago, and much investor disappointment is already reflected in stock prices,'' Cohen said.
``Our main assumption is that the current economic malaise will be resolved, and that economic and profit growth will be closer to trend rates.''
Cohen noted the earnings slowdown was pronounced in sectors most sensitive to the economy, as well as in computer and telecommunications equipment.
With Wednesday's note, Cohen was only the latest Wall Street strategist to cut her year-end targets.
Jeffrey Applegate of Lehman Brothers cut his year-end S&P 500 index target twice this year, the last time to 1400 in March, after saying it was ``silly'' to maintain a year-end price target of 1,600.
Salomon Smith Barney's Tobias Levkovich, cut his S&P 500 year-end target to 1,400 from 1,450 earlier this month, and for the blue-chip Dow Jones industrial average (.DJI) to 11,400 from 11,750, even as he urged investors to buy more stocks.
One of the few holdouts is Ed Kerschner of UBS Warburg who has retained the bullish target he began the year with -- 1,715.>> |
