Analysts' Views on Wall Street's Most Expensive Stocks
For investors concerned about the overall expensiveness of the stock market, some stocks stand out as particularly worrisome. CNBC Pro has identified the stocks with the largest valuation premium in the S&P 500. These stocks have forward price-to-earnings ratios that are significantly higher than the average of the past five years. Among these expensive stocks, we have filtered for those that are also disliked by analysts due to their valuations. Less than half of the analysts covering these stocks rate them as a buy, and their shares are already trading close to or above Wall Street's consensus price target for the next 12 months. Let's take a closer look at the top ten most expensive stocks on Wall Street and what analysts have to say about them.
Intel is currently trading at an 86% premium compared to its average forward price-to-earnings ratio over the past five years. Just under one-fifth of analysts covering the stock rate it as a buy. Intel is not only one of the most fundamentally expensive stocks in the broader market, but it is also the most overvalued stock in the Dow Jones Industrial Average on a technical basis. The stock's price is trading about 2.5 standard deviations above its 50-day moving average. Despite a 46% increase this year driven by its return to profitability in the second quarter, the expensive valuation suggests it may be time to exercise caution.
Seagate Technology Holdings
Seagate Technology Holdings has also made the list of stocks trading at historically high levels of expensiveness. The data storage company has faced a slowdown in demand for PCs and smartphones, resulting in an 11% decline this month and paring its year-to-date gain to 19%. Only 30% of analysts covering Seagate rate it as a buy, and they believe the stock's run may have reached its peak. The recent downgrade by Barclays, which issued a price target indicating a 9% downside, further supports this view.
International Paper Company
International Paper Company, a beneficiary of the pandemic, is another stock that has not gained much popularity among investors. Approximately 18% of analysts give the company a buy rating. The stock is currently trading at a 44% premium compared to its average forward price-to-earnings ratio over the past five years, making it the third-highest on the list. While the stock has declined about 2% this year, it has gained over 6.5% this quarter as the company's inventories return to target levels.
Other expensive companies in the broader market include real estate stock Digital Realty Trust, potential AI beneficiary International Business Machines, and used vehicle retailer CarMax.
In summary, these expensive stocks with negative analyst sentiment raise concerns for investors. The high valuations and limited buy ratings indicate potential risks. Investors should carefully evaluate these stocks before making investment decisions.
Conclusion: Implications for New Businesses
The analysis of Wall Street's most expensive stocks provides crucial insights for new businesses.
Valuation and Analyst Sentiment
The high valuations and negative analyst sentiment towards companies like Intel, Seagate Technology Holdings, and International Paper Company underscore the importance of prudent financial management. New businesses should strive to maintain reasonable valuations to attract positive analyst sentiment and investor interest.
Market Dynamics and Business Performance
The performance of these companies also highlights the influence of market dynamics on business performance. For instance, the slowdown in demand for PCs and smartphones has impacted Seagate Technology Holdings, while the pandemic has benefited International Paper Company. New businesses must stay abreast of market trends and adapt their strategies accordingly.
The caution expressed by investors towards these expensive stocks emphasizes the need for new businesses to manage their growth carefully. Overexpansion and overvaluation can lead to investor skepticism and potential stock price declines.
In conclusion, the high valuations and negative analyst sentiment towards some of Wall Street's most expensive stocks offer important lessons for new businesses. By understanding these dynamics, new businesses can make informed decisions to guide their growth and financial management.