A previous version of this text incorrectly listed Netflix as one in every of the Magnificent Seven stocks as a substitute of Amazon.

Just days ahead of probably pivotal results from Nvidia Corp., Goldman Sachs has lifted its year-end S&P 500 goal to five,200, but with much of that hinging on Big Tech’s ability to maintain delivering strong profits.

“Our upgraded 2024 EPS forecast of $241 (8% growth) stands above the median top-down strategist forecast of $235 (6% growth) and reflects our expectation for stronger economic growth and better profits for the Information Technology and Communication Services sectors, which contain 5 of the ‘Magnificent 7’ stocks,” said a team led by David Kostin, chief U.S. equity strategist, in a note late Friday.

With its recent goal, Goldman falls consistent with a few of Wall Street’s most bullish forecasters — Oppenheimer’s John Stoltzfus and Fundstrat’s Tom Lee who also see a 5,200 finish after each accurately called 2023’s rally. Ed Yardeni of Yardeni Research is at the highest, with a goal of 5,400.

It marks the second time Goldman has lifted its S&P 500 goal, after a bump to five,100 from 4,700 in late December. Earlier this 12 months, RBC Capital boosted its S&P 500 forecast to five,150 from 5,000 and UBS raised its own goal to five,150 from 4,850.

Behind that recent forecast is a more bullish economic outlook — Goldman’s economists recently lifted their 4Q/4Q 2024 real U.S. GDP growth forecast to 2.4% on account of stronger consumer spending and residential investment. That’s as they expect an S&P 500 forward price/earnings multiple of 19.5 times, barely below the present 20 times.

“The nearly-completed 4Q earnings season highlighted the flexibility of corporates to sustain profit margins despite slowing inflation,” said Kostin and his team.

However the bank’s rosier outlook hinges on the flexibility of Big Tech to maintain performing. Kostin and his team noted how the fourth quarter had “highlighted the continuing fundamental strength” of the Magnificent Seven stocks — Meta Platforms
META,
-2.21%,
Microsoft
MSFT,
-0.61%,
Apple
AAPL,
-0.84%,
Alphabet
GOOGL,
-1.58%,
Tesla
TSLA,
-0.25%,
Amazon
AMZN,
-0.17%
and Nvidia
NVDA,
-0.06%.

Analysts have warned that Nvidia earnings, due Wednesday, could mark a “make or break” moment for stocks, with expectations for earnings per share of $4.59, a greater than 700% surge from the identical quarter last 12 months.

Read: Bullish bets on Nvidia, other ‘Magnificent Seven’ members near their most crowded levels prior to now 12 months

As Deutsche Bank strategist Jim Reid told clients on Monday, “it’s a mirrored image of the world we live in that an important event of the week could also be Nvidia’s earnings on Wednesday. It’s now the 4th largest company on this planet and the best performer within the S&P 500 to date this 12 months (+46.6% YTD), so this might be very essential for sentiment.”

Addressing Nvidia earnings directly, Goldman strategists said if the chip maker reports in-line estimates, “the Magnificent Seven can have grown sales by 15% 12 months/12 months and lifted margins by 582 basis points 12 months/12 months, resulting in earnings growth of 58%.”

The bank expects Information Technology and Communications Services, which contain five of the Magnificent Seven — Meta, Microsoft, Apple, Alphabet and Nvidia — to post the strongest earnings growth amongst S&P 500 sectors this 12 months. The remaining of the index will see some slight improvements, but “to a much smaller degree,” they said.

Goldman added that strength in Big Tech has also driven higher forecasts amongst its peers, with Magnificent Seven earnings estimates revised up by 7% prior to now three months and margins forecasts by 86 basis points. That’s versus 3% and 30 basis points downward revisions to earnings and margins forecasts for the remainder of the 493 stocks.

The bank said stronger U.S. growth than expected or continued upside surprises from mega-caps could each be upside risks to their forecasts.

“Likewise, disappointing growth within the macroeconomy or from the biggest stocks would create downside risk to our S&P 500 earnings forecasts. As well as, an acceleration in input cost inflation would diminish the outlook for the nascent profit margin rebound and subsequently for broad corporate earnings growth,” said Kostin and his team.