Investing

10 Overbought Stocks That Could Now Be Greatly Overvalued

The stock market is supposed to be in a bear market now that the COVID-19 pandemic created the quickest and deepest recession of modern history. After having trillions of dollars thrown into the economy at consumers, business owners and taxpayers, and with zero-percent interest rates, the stock market already has recovered the lion’s share of its losses. To add more insult to the bears, the Dow Jones industrials hit 25,000 and the S&P 500 hit 3,000 again.

Even with the Nasdaq now positive year to date, some investors have to be wondering if some of the great rally stocks have gone too far up. There is still a recession and the business climate likely will not immediately bounce back to pre-recession levels. After all, 20%-plus unemployment and over −20% GDP expectations have to mean something.

24/7 Wall St. has identified 10 stocks that have screamed higher since the panic selling levels in March. These should not be considered recommendations to create “short sale” positions by any means. The importance of looking at these at this time is that Wall Street analysts are great at telling customers to buy stocks. They often are not so great at telling their customers that the stock has risen massively or that it may have risen too much.

The basis for this review is to identify some of the stocks that have seen massive gains and where the valuations are now considerably higher than what most of Wall Street’s analysts have said the shares are worth.

At the peak of the selling in March, the Dow was down 39% from its high, and the S&P 500 was down almost 35% from its high. There may still be a sharp recession in the economic reports and in in the annualized corporate earnings trends for the S&P 500 as a whole, but it looks like it is getting more difficult by the day for market pundits to keep calling this a bear market.

On last look, the S&P 500 was now only down 11% from its all-time high and was only down 7% year to date. The Nasdaq was only down 4% from its all-time high, but on last look it was up by 5% so far in 2020. The Dow may still be down 15% from its highs seen in February, but it’s now down only 12% year to date.

Here are 10 stocks that most investors and traders will know that are trading handily above their consensus analyst target prices and have all rallied greatly from the recession-induced (or pre-recession) lows.

We have shown consensus analyst target prices and other consensus data from Refinitiv. While many of these stocks have no recaptured every cent of their pre-recession level, most have, and to be on this list a company’s stock price had to be handily above its consensus price target. We have also shown the so-called street high targets to show that there may be some additional analysts who still see even more upside ahead.

Apple Inc. (NASDAQ: AAPL) seems to catch Wall Street off guard all the time. The analyst community kept lowering expectations during the selling panic, and Apple’s earnings refuted much of the concerns, despite the woes in China and globally. Apple closed down as low as $223.76 on March 23, then rallied to a close of $293.01 by the end of April, and its shares were up marginally on Tuesday near $320. Even as Apple’s analysts have been chasing their consensus target price up, it is still under $310, and its all-time high before the February peak was $327.85.

Chipotle Mexican Grill Inc. (NYSE: CMG) traded as high as $1,087.00 on Tuesday morning, another all-time high. The consensus price target is still not even up at $900 yet, and its lowest closing bell price during the panic selling was $465.21 on March 18. Analysts have been aggressively raising target prices on Chipotle, but most of them have still not kept up with the stock performance. Piper Sandler recently raised its target price to $1,100 from $850, and KeyBanc recently raised its target price to $1,125 from $955.