These are among the S&P 500 technology companies with the highest percentages of “buy” or equivalent ratings among analysts polled by FactSet, who expect high double-digit increases for the stocks over the next 12 months. – Getty Images
Investors have had quite a wake-up call to daily volatility in the stock market. As we saw on Monday, the broad indexes can shift to large gains and then back into deep red territory as rumors circulate. But a high level of volatility can also give rise to opportunities for patient investors looking to buy quality merchandise at low (or at least greatly reduced) prices.
Let’s begin with a look at how the 11 sectors of the S&P 500 SPX have performed this year through Monday, sorted by how much they have declined, with the full index at the bottom of the list. All price changes in this article exclude dividends.
Sector or index
2025 price change
2024 price change
2023 price change
2022 price change
Price change since end of 2021
Information Technology
-22.5%
35.7%
56.4%
-28.9%
16.9%
Consumer Discretionary
-21.1%
29.1%
41.0%
-37.6%
-10.3%
Communication Services
-13.6%
38.9%
54.4%
-40.4%
10.4%
Industrials
-10.9%
15.6%
16.0%
-7.1%
11.1%
Financials
-8.8%
28.4%
9.9%
-12.4%
12.9%
Materials
-8.7%
-1.8%
10.2%
-14.1%
-15.1%
Energy
-8.0%
2.3%
-4.8%
59.0%
42.5%
Real Estate
-6.7%
1.7%
8.3%
-28.4%
-26.5%
Utilities
-3.1%
19.6%
-10.2%
-1.4%
2.6%
Healthcare
-2.3%
0.9%
0.3%
-3.6%
-4.6%
Consumer Staples
-0.6%
12.0%
-2.2%
-3.2%
5.5%
S&P 500
-13.9%
23.3%
24.2%
-19.4%
6.2%
Source: FactSet
The last row of the table shows how the full S&P 500 has performed for each of the previous three calendar years. The right-most column shows weighted price changes for the index and the sectors from the end of 2021 through Monday, in order to reflect the seesaw pattern of a 19.4% decline for the index in 2021, followed by stellar gains in 2023 and 2024 leading into this year’s decline.
Now let’s take another look at the sectors, this time showing forward price-to-earnings ratios and how they compare with their 5- and 10-year average valuations. The forward P/E ratios are prices divided by rolling consensus earnings-per-share estimates, weighted by market capitalization.
Sector or index
Forward P/E
Forward P/E at end of 2024
5-year average P/E
10-year average P/E
Information Technology
21.6
28.8
25.2
20.7
Consumer Discretionary
23.1
29.6
32.0
27.1
Communication Services
16.6
19.5
19.3
19.0
Industrials
19.5
21.7
21.6
19.4
Financials
14.4
16.5
15.3
14.5
Materials
17.8
18.6
18.4
17.3
Energy
12.8
13.7
1.9
13.9
Real Estate
16.6
17.6
19.3
18.8
Utilities
16.5
17.3
17.9
17.5
Healthcare
16.3
16.9
17.2
16.5
Consumer Staples
21.5
21.5
20.5
19.8
S&P 500
18.3
21.6
20.2
18.6
Source: FactSet
The S&P 500 now trades at a forward P/E of 18.3, which is well below its five-year average and slightly below its 10-year average valuation. The information technology sector’s forward P/E has declined to 21.6 from 28.8 on Dec. 31. The sector now trades well below its average five-year P/E but still slightly above its 10-year average valuation. These valuation declines illustrate why the term “correction” is used to describe a decline of 10% or more from a recent high. The idea is that valuations have been reset to more reasonable levels.
There are various ways to screen stocks, including looking at expected growth rates for companies’ revenue and earnings. It might be a bit early for that type of screen, as analysts cannot predict what form President Donald Trump’s trade policies will take. Early Tuesday, U.S. Treasury Secretary Scott Bessent said Trump had asked him to begin trade negotiations with Japan’s government.
On Sunday, a team of analysts at Jefferies led by Brent Thill “preemptively cut forecasts” on 29 software companies, but Thill wrote in a note to clients that estimates for revenue and earnings for the group had been lowered by only 2% and 1%, respectively, for the companies’ current fiscal years.
Thill cut his price target for Microsoft Corp.’s MSFT stock by 5% to $475 from $500 on Sunday. The new target was 33% higher than the stock’s closing price of $357.86 on Monday.
There are 69 stocks in the S&P 500 information technology sector; 21 of them are rated a “buy” or the equivalent by at least 75% of analysts working for brokerage or research firms polled by FactSet.
Here they are, sorted by upside potential implied by the consensus price targets. In the right-most column, you can see how much the consensus price targets have changed since the end of last year.
Micron MU ranks second on the list, with the consensus price target implying 88% upside potential over the next 12 months from Monday’s close. The stock is inexpensively priced, according to Charles Lemonides, chief investment officer of ValueWorks — the New York-based hedge fund management firm he founded in 2001, with $312 million in assets under management as of Dec. 31.
During an interview with MarketWatch, Lemonides pointed out that Micron’s stock had traded above $150 last June. It closed at $68.37 Monday.
Micron’s forward P/E ratio was 7.2 as of the close on Monday. The stock’s average forward P/E over the past year has been 13.3 and has traded at a forward P/E as high as 25.9 during that period. Lemonides acknowledged that Micron’s focus on designing and manufacturing computer-memory and data-storage products is cyclical, but said the company’s profits ”could torque higher” as the industry hardware build-out continues to support the development of artificial intelligence technology.
“The stock has come crashing down. The earnings have not,” he said.
The consensus estimate is for Micron to earn $6.97 a share during its current fiscal year that ends in August, increasing to $11.12 the following fiscal year. So investors are looking at “a mid-single-digit multiple to next year’s earnings with demand expected to grow dramatically,” Lemonides said.
“A lot of memory is going to be required, from self-driving cars to data centers to video monitoring to AI,” he said.
