Analysts See 10% Gains Ahead For The Holdings of XSW

Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, we have compared the trading price of each holding against the average analyst 12-month forward target price, and computed the weighted average implied analyst target price for the ETF itself. For the SPDR S&P Software & Services ETF ( XSW), we found that the implied analyst target price for the ETF based upon its underlying holdings is $60.99 per unit.

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With XSW trading at a recent price near $55.32 per unit, that means that analysts see 10.25% upside for this ETF looking through to the average analyst targets of the underlying holdings. Three of XSW's underlying holdings with notable upside to their analyst target prices are RingCentral Inc ( RNG), DST Systems Inc. ( DST), and Virtusa Corp ( VRTU). Although RNG has traded at a recent price of $21.55/share, the average analyst target is 33.54% higher at $28.78/share. Similarly, DST has 20.14% upside from the recent share price of $103.21 if the average analyst target price of $124.00/share is reached, and analysts on average are expecting VRTU to reach a target price of $26.62/share, which is 19.82% above the recent price of $22.22. Below is a twelve month price history chart comparing the stock performance of RNG, DST, and VRTU:

RNG, DST, and VRTU Relative Performance Chart

Below is a summary table of the current analyst target prices discussed above:

Name Symbol Recent Price Avg. Analyst 12-Mo. Target % Upside to Target
SPDR S&P Software & Services ETF XSW $55.32 $60.99 10.25%
RingCentral Inc RNG $21.55 $28.78 33.54%
DST Systems Inc. DST $103.21 $124.00 20.14%
Virtusa Corp VRTU $22.22 $26.62 19.82%

Are analysts justified in these targets, or overly optimistic about where these stocks will be trading 12 months from now? Do the analysts have a valid justification for their targets, or are they behind the curve on recent company and industry developments? A high price target relative to a stock's trading price can reflect optimism about the future, but can also be a precursor to target price downgrades if the targets were a relic of the past. These are questions that require further investor research.

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