[ad_1]
Investors and analysts are bullish on the S&P 500. But they are starting to harshly criticize individual stocks for running too much.
X
Analysts believe 10 S&P 500 stocks, the winners in healthcare Modern (MRNA) and Waters (WAT) plus materials company Albemarle (ALB), are overvalued by 10% or more, according to an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
And analysts aren’t afraid to hammer the table as a warning to investors.
Moderna, for its part, is an S&P 500 stock that has risen 475% in one year. And Bank of America analyst Geoff Meacham called Moderna’s share price “ridiculous” this month. He said the stock was 75% overvalued.
He is not alone, however. Analysts believe Moderna stock is 30.6% overvalued over its 12-month price target. But that’s not the only S&P 500 stock that analysts say has risen too much.
The S&P 500 defies all expectations
The year round story for the S&P 500 is one of exceeding all expectations. And that prompts some analysts to sound the alarm bells.
Analysts now believe 70 stocks in the S&P 500 are overvalued. And yet, analysts are mostly optimistic. Their 12-month price targets show more upside for over 85% of the S&P 500.
And that makes sense. Almost all of the companies in the S&P 500 reported second quarter earnings. And nearly 90% of them were earning more than analysts thought.
And that pushes analysts to raise their expectations. Analysts now believe S&P 500 company profits will rise nearly 28% in the current quarter compared to the same period a year earlier, according to FactSet. That’s up from the 24.2% profit growth they expected on June 30.
But still, they see pockets where investors go too far.
Are the S&P 500 Health Care Hopes Too High?
The big jump in S&P 500 shares in the health care sector worries analysts. Four of the 10 most overvalued stocks in the S&P 500 are in healthcare, analysts warn. It is more than any other sector.
Moderna’s vaccine and miracle technology put the S&P 500 stock in the stratosphere. With its powerful 275% increase this year, Moderna’s stock fixes the company’s value at over $ 157 billion. This makes Moderna the 56th most valued company in the S&P 500.
Meacham believes the valuation means that the company is 75% overvalued. Amgen, an older and bigger rival, is worth around 20% less, or $ 130 billion. He thinks Moderna is only worth $ 115 per share. That’s tougher than the already significantly lower 12-month average price target of all analysts of 270.64.
But it also means analysts believe Moderna has a good chance of going down (30%) from Friday’s closing price of 390.06 per share. What do the charts and earnings say about buying Moderna shares?
Analysts are also sounding the alarm bells on Waters, another healthcare game. Shares of the medical testing company rose more than 86% in one year to 403.50. And the profit growth is impressive. Analysts believe the company’s earnings will rise nearly 18% this year to $ 10.67 per share.
Despite this, analysts believe the S&P 500 stock is stuck. And they demand that stocks are worth just 340.69 per share in a year, down 15.5% in 12 months.
S&P 500 warning in materials
However, analysts warn of the winners in health care. Two materials companies are also on their list of successes.
Take Albemarle. Shares of the specialty chemicals maker rose more than 150% year on year to 235.27. And this despite estimates calling for a decline in the company’s profits of more than 13% this year.
Thus, analysts say that the S&P 500 stock is overvalued by more than 15%. Their 12-month target is only 199.28 per share in 12 months.
You cannot blame investors for ignoring such warnings. Analysts have been trying to track positive surprises from S&P 500 companies throughout the year.
But if the analysts are ultimately right, you can’t say you weren’t warned.
S&P 500 stocks should fall?
Analysts believe these stocks are overvalued by at least 10%
| Company | Teleprinter | August 13 close | Stock% ch. 1 year | Target price | Implied disadvantage | Sector |
|---|---|---|---|---|---|---|
| Modern | (MRNA) | 390.06 | 475.1% | 270.64 | -30.6% | Health care |
| Waters | (WHAT) | 404.50 | 86.4 | 340.69 | -15.8 | Health care |
| Albemarle | (WHITE) | 235.27 | 156.8 | 199.28 | -15.3 | Materials |
| Iron mountain | (MRI) | 46.04 | 56.8 | 39,378 | -14.5 | Real estate |
| Oracle | (ORCL) | 90.33 | 67.2 | 77.76 | -13.9 | Computer science |
| Nucor | (NUE) | 126.19 | 177.3 | 111.11 | -11.9 | Materials |
| Robert Half International | (RHI) | 103.66 | 83.8 | 91.64 | -11.6 | Industrial |
| Mettler-Toledo | (MTD) | 1534.65 | 57.7 | 1361.81 | -11.3 | Health care |
| Illumina | (ILMN) | 517.36 | 46.3 | 461.58 | -10.8 | Health care |
| Kroger | (KR) | 42.80 | 23.7 | 38.47 | -10.1 | Basic consumer products |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
YOU MAY ALSO LIKE:
8 most important stocks to boom in 2021, analysts say
MarketSmith: research, charts, data and coaching in one place
These 12 stocks went from $ 10,000 to $ 257,833 in 12 months
A “new normal” for the market rally; Three giants near the points of purchase
[ad_2]
Source link