Even Analysts Say 7 Super-Expensive Stocks Cost Too Much
25 Nov 2021
Nobody sounds an alarm when the S&P 500 is due for a fall. But if you listen, you'll already hear some bells ringing.
Showing investors are getting uncomfortable with stocks' non-stop rally, even normally bullish analysts are calling for downside in seven hot S&P 500 stocks like Juniper Networks (JNPR), Etsy (ETSY) and Enphase Energy (ENPH), says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
And that's saying something.
It's tough to bet against any of these S&P 500 stocks. They're all up anywhere from 36% to 93% this year. That easily tops the S&P 500's 25% rise this year. But they're also pricey based on traditional measures. All are trading for at least 70 times their earnings the past 12 months, which is double the S&P 500's already lofty valuation.
And analysts think all of them are already trading at or beyond what they should be worth in 12 months.
"There's been so much anxiety about inflation and interest rates that investors are clearly apprehensive about over-committing," said Craig Erlam, senior market analyst at Oanda.
S&P 500 Blasting Off
There's no doubt about it. The S&P 500 is on fire.
The SPDR S&P 500 Trust (SPY) is up more than 25% this year. And that's already one for the record books. "There are only six weeks to go in 2021 and it has been an incredible year for the stock market bulls. In fact, in many ways it could go down as one of the best years ever," said Ryan Detrick, market strategist for LPL Financial.
It's been a straight-up rally. If the S&P 500 ended the year at current levels, it would be up at least 15% annually for three-straight years, Detrick says. That's only happened one other time in history: the amazing five-year winning streak in the late 1990s.
But warnings that stocks are getting ahead of themselves, or extended, are starting to pile up. And that's especially true when even normally bullish analysts wave warning flags.
Analysts Sound Off On S&P 500 Tech
Not surprisingly, S&P 500 analysts are finding the most pockets of overvaluation in technology. The tech-heavy Nasdaq 100 (QQQ) is up more than 27% this year. That's outstripping all the major indexes.
All told, more than half of the S&P 500 stocks with P-E ratios of 70 of more, which analysts say are already trading past their 12 month price targets, call the information technology sector home.
Juniper Networks is a case in point.
The advanced networking gear maker's shares are up 44% this year to 32.40 and trading for 72 times earnings in the past 12 months. Normally that sounds like a red-hot stock analysts would pile onto. But they're saying shares are already nearly 13% higher than what they should be in 12 months. Analysts rate the stock a "hold," which some on Wall Street interpret as a sell signal. And shares are nearly 9% past their 29.97 buy point, says MarketSmith.
What's Next?
But it's not just S&P 500 tech stocks that analysts are getting uncomfortable with.
Analysts think consumer discretionary stock Etsy overshot its 12-month price target by 9%. Shares of the stock are up an impressive 57% this year to 279.24. And they trade for nearly 83 times its profit the past 12 months.
Not all think the S&P 500 is in big trouble, though. "We should be extremely grateful for how strong 2021 has been, and we think the bull market for stocks should continue into 2022 as well," Detrick says. And some companies, like well-run Enphase, continue to rally faster than analysts can catch up.
But when even analysts are sounding bells, it's wise to at least listen.
Pricey S&P 500 Stocks Analysts Think Face Downside
All trade for 70-times trailing earnings, twice the S&P 500
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