Investors and analysts are bullish on the S&P 500. But they’re starting to severely call out individual stocks for running up too much.
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Analysts think 10 S&P 500 stocks, namely health care winners Moderna (MRNA) and Waters (WAT) plus materials firm Albemarle (ALB), are overvalued by 10% or more, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
And analysts are not afraid to pound the table as a warning to investors.
Moderna for one is an S&P 500 stock up a blistering 475% in a year. And Bank of America analyst Geoff Meacham called Moderna’s stock price “ridiculous” this month. He said the stock is 75% overvalued.
He’s not alone, though. Analysts think Moderna stock is 30.6% overvalued versus their 12-month price target. But it’s not the only S&P 500 stock that analysts think ran up too much.
S&P 500 Defying All Expectations
The story all year for the S&P 500 is one of exceeding all expectations. And that’s prompting some analysts to sound an alarm.
Analysts now think 70 stocks in the S&P 500 are overvalued. And yet, analysts are mostly bullish. Their 12-month price targets show more upside for more than 85% of the S&P 500.
And that makes sense. Nearly all S&P 500 companies reported their second-quarter profit. And nearly 90% of them earned more than analysts thought.
And that’s pushing analysts to up their expectations. Analysts now think S&P 500 companies’ profit will jump nearly 28% in the current quarter versus the same year-ago period, says FactSet. That’s up from the 24.2% profit growth they expected on June 30.
But still, they see pockets where investors are going too far.
S&P 500 Health Care Hopes Too High?
The big jump in S&P 500 health care stocks is worrying analysts. Four of the 10 most overvalued S&P 500 stock are in health care, analysts warn. That’s more than any other sector.
Moderna’s wonder vaccine and technology is putting the S&P 500 stock into the stratosphere. Thanks to its powerful 275% move higher this year, Moderna’s stock pegs the company’s value at more than $157 billion. That makes Moderna the 56th most valuable company in the S&P 500.
Meacham thinks that valuation means the company’s is 75% overvalued. Older and larger rival Amgen is worth roughly 20% less, or $130 billion. He thinks Moderna is only worth $115 a share. That’s harsher than all analysts’ already starkly lower 270.64 12-month average price target on the stock.
But that also means analysts think Moderna has quite a ways to fall (30%) from Friday’s closing price of 390.06 a share. What do the charts and earnings says about buying Moderna stock?
Analysts are likewise sounding the alarm on fellow health care play Waters. Shares of the medical testing company are up more than 86% in a year’s time to 403.50. And profit growth is impressive. Analysts think the company’s profit will jump nearly 18% this year to $10.67 a share.
Even so, analysts rate the S&P 500 stock a hold. And they’re calling for the shares to be worth just 340.69 a share in a year, down 15.5% in 12 months.
S&P 500 Warning In Materials
It’s not just health care winners, though, analysts are warning on. Two materials companies, too, are on their hit list.
Take Albemarle. Shares of the specialty chemicals maker are up more than 150% in a year’s time to 235.27. And that’s despite estimates calling for the company’s profit to fall more than 13% this year.
And so, analysts are saying the S&P 500 stock is overvalued by more than 15%. Their 12-month target is just 199.28 a share in 12 months.
You can’t blame investors for blowing off such warnings. Analysts have been scrambling to keep up with S&P 500 companies’ positive surprises all year.
But if the analysts are ultimately proven right, you can’t say you weren’t warned.
S&P 500 Stocks Due For A Drop?
Analysts think these stocks are at least 10% overvalued
| Company | Ticker | Aug. 13 close | Stock % ch. 1-year | Target price | Implied downside | Sector |
|---|---|---|---|---|---|---|
| Moderna | (MRNA) | 390.06 | 475.1% | 270.64 | -30.6% | Health Care |
| Waters | (WAT) | 404.50 | 86.4 | 340.69 | -15.8 | Health Care |
| Albemarle | (ALB) | 235.27 | 156.8 | 199.28 | -15.3 | Materials |
| Iron Mountain | (IRM) | 46.04 | 56.8 | 39.378 | -14.5 | Real Estate |
| Oracle | (ORCL) | 90.33 | 67.2 | 77.76 | -13.9 | Information Technology |
| Nucor | (NUE) | 126.19 | 177.3 | 111.11 | -11.9 | Materials |
| Robert Half International | (RHI) | 103.66 | 83.8 | 91.64 | -11.6 | Industrials |
| 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 | Consumer Staples |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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