Some of the most loved stocks on Wall Street have had a rough September.
Amazon, PayPal, Alphabet and Facebook — the stocks with the most buy ratings on the Nasdaq 100 — have all fallen by double digits this month as sell-offs brought high-flying momentum names to a halt. For example, Amazon has 44 buy ratings but has fallen more than 12% this month.
Matt Maley, chief market strategist at Miller Tabak, does not see a pullback as deep as the dot-com bubble for these stocks. However, he does expect the group to fall further.
“These stocks have just become ridiculously overbought, overloved, overowned and overvalued. They got to such extremes at the beginning of the month that they have to work off more than they have already, in my opinion, to really see the kind of bounce or kind of meaningful bottom that a lot of people are looking for,” Maley told CNBC’s “Trading Nation” on Thursday.
He expects these stocks to drop by 5% to 10% more before hitting bottom. Alphabet, for example, would need to fall to $1,350 before it reaches an oversold condition, Maley said. That also marks a key support level since the June lows.
PayPal would need to decline to $174 before reaching an oversold level. It closed Thursday above $182.
“These are great companies but sometimes they get so far ahead of themselves that they need a pretty significant pullback before they become great value,” said Maley.
Though lower this month, those stocks have outperformed benchmarks this year. Amazon and PayPal have risen more than 60% in 2020.
The momentum space highlights a big difference between the have and have-nots, said Michael Bapis, managing director of Vios Advisors at Rockfeller Capital Management.
“There’s a really big disparity between growth and value. So I think part of the issue you’re having is you’re seeing a growth-to-value-sector rotation over the next six months,” Bapis said during the same “Trading Nation” segment.
There has been a clear tilt toward growth this year: The IVW growth ETF has risen 15%, while the IVE value ETF has fallen 16%.
“There is a wide disparity there and then even within tech, you’re seeing a disparity between some of these companies you mentioned, and the tech value stocks — companies like IBM, Intel — they’re trading at, you know, 10 to 12 to 15 times earnings. For a tech company those are very, very attractive levels,” Bapis said.
