Goldman Sachs raised its 12-month price target for the STOXX 600 pan-European equity index, citing steady corporate profit growth and optimism linked to artificial intelligence. The bank's new 660-point target implies roughly 5.4% upside from the index's most recent close of 626 points.
Goldman also revised its shorter-term targets, moving the three-month target to 640 and the six-month target to 645 points.
Drivers behind the upgrade
Goldman Sachs analysts point to several factors supporting further gains:
- strong nominal growth in corporate results;
- improving earnings expectations in the energy sector;
- broadly stable profit margins across the market;
- and reinforced expectations around artificial intelligence, which boosted stocks with high AI exposure.
At the same time, the bank warned that inflationary pressure and expectations of a persistently high interest-rate environment will constrain further multiple expansion.
Valuation and sector dynamics
The STOXX 600's 12-month forward P/E ratio stands at 17.55, substantially below the U.S. S&P 500's multiple of 27.94. While Europe lacks the extreme concentration seen in the U.S. market, Goldman says the recent rally has still been driven mainly by AI-exposed stocks and the energy sector, with consumer sectors lagging.
Goldman forecasts EPS growth for the STOXX 600 of 10% in 2026 and 5% in 2027, attributing the slowdown largely to pressure on profit margins from higher energy costs.
Positioning of investors
The bank notes that international investors continue to reallocate capital into Europe for value opportunities and diversification. By contrast, local European investors remain cautious amid weak economic growth and macro uncertainty.
Implications for the market
Goldman's upgrade suggests that if corporate profits remain robust and AI-driven expectations materialize, the STOXX 600 could see further gains. However, higher inflation and a sustained high-rate environment could limit how much valuations can expand.
Note: this article is based on Reuters reporting. It does not constitute investment advice or a recommendation.
