5 Most Overvalued Companies According to the Media

In this article, we will take a look at the 5 most overvalued companies according to the media. If you want to see more stocks in this selection, go to the 10 Most Overvalued Companies According to the Media.

5. Amazon.com, Inc. (NASDAQ:AMZN)

Flagged Overvalued by Number of Articles: 3

Amazon.com, Inc. (NASDAQ:AMZN) is a Seattle, Washington-based diversified technology company that is led by its e-commerce division and a growing cloud computing segment. Furthermore, the company is also involved in digital streaming and other aspects of the technology sector.

Presently, the shares of Amazon.com, Inc. (NASDAQ:AMZN) are trading at a forward EV/EBITDA multiple of 14.33x. This represents a premium of 56.35% when compared against the sector median forward EV/EBITDA multiple of 9.16x. In a research note issued on November 22, Thomas Champion at Piper Sandler highlighted that the growth of Amazon Web Services (AWS) has started to slow down in line with the difficult macroeconomic environment. Furthermore, there has been a widespread belief that the slowdown in the growth of consumer discretionary spending could take a toll on holiday spending, adversely impacting Amazon.com, Inc.’s (NASDAQ:AMZN) growth prospects.

Here’s what Farnam Street Investments said about Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2022 investor letter:

“Change doesn’t just impact investors. Business people also bet for or against change. Jeff Bezos was once asked this exact question:

“You can build a business strategy around the things that are stable in time. It’s impossible to imagine a future ten years from now where a customer comes up and says, ‘Jeff, I love Amazon, I just wish the prices were a little higher.’ Or, ‘I love Amazon, I just wish you’d deliver a little slower.’ Impossible. So we know the energy we put into these things today will still be paying off dividends ten years from now. When you have something you know is true, you can afford to put a lot of energy into it.”

A lot of energy… and more than $172 billion in capital expenditure in the last fifteen years.

Deeper, slower moving layers turn exponential growth into “S-curves.” A rapidly dividing bacteria crashes into the resource-wall of its Petri dish. Nineteenth-century commercial robber barons were smacked by the governance layer of the Sherman Antitrust act. Amazon (NASDAQ:AMZN) Prime free shipping leaned on the creaking infrastructure of the U.S. Postal Service until it was forced to invest in its own infrastructure (all those delivery vans you see driving around).

Hopefully, next time you’re thinking about change, you can recall pace layers as a helpful construct to understand how successful systems change.

4. UnitedHealth Group Incorporated (NYSE:UNH)

Flagged Overvalued by Number of Articles: 3

UnitedHealth Group Incorporated (NYSE:UNH) is a Minnetonka, Minnesota-based diversified healthcare and insurance company.

The stock is currently trading at an adjusted forward P/E multiple of 24.47x, representing a premium of 26.6% compared to the sector median adjusted forward P/E multiple of 19.33x and a premium of 22.1% against the company’s own five-year adjusted forward P/E. John Ransom at Raymond James believes that UnitedHealth Group Incorporated (NYSE:UNH) is carrying a growing risk-bearing business in the form of OptumHealth. The health services innovation company under the portfolio of UnitedHealth Group Incorporated (NYSE:UNH) is expected to be adversely impacted by negative outcomes in Medicare Advantage. The company could also face pressure due to rising medical costs due to a shortage of workforce and other factors.

Here’s what Stewart Asset Management said about UnitedHealth Group Incorporated (NYSE:UNH) in its Q3 2022 investor letter:

“Looking at the Great Recession which began at year-end 2007 and lasted to mid-year 2009 is helpful too. Our four largest current holdings in the portfolio weathered that period well. UnitedHealth’s (NYSE:UNH) earnings were resilient. While it reported modestly down earnings in 2008, its earnings rebounded quickly to record highs in 2010 and the shares responded strongly in anticipation of this.”

3. The Walt Disney Company (NYSE:DIS)

Flagged Overvalued by Number of Articles: 3

The Walt Disney Company (NYSE:DIS) is a Burbank, California-based diversified mass media and entertainment giant.

The stock is currently trading at an adjusted forward P/E multiple of 22.33x, representing a hefty premium of 52.8% compared to the sector median of 14.6x. The Walt Disney Company (NYSE:DIS) saw the return of former CEO and Chairman Bob Iger in November 2022 following a period of administrative difficulties since his departure in 2020. In a research note issued to investors on November 30, Hamilton Faber at Atlantic Equities highlighted that Mr. Iger needs to look at the long-term profitability of The Walt Disney Company (NYSE:DIS), which has come under pressure due to the heavy losses incurred by the company’s streaming division. The parks division is also facing significant challenges which need to be addressed. The analyst has assigned The Walt Disney Company (NYSE:DIS) stock a Neutral rating with a target price of $107.

Harding Loevner shared its stance on The Walt Disney Company (NYSE:DIS) in its Q1 2022 investor letter. Here’s what the firm said:

“The war in Ukraine has given new urgency to the question of whether globalization has reached a tipping point and if the familiar web of decentralized, just-in-time, global supply chains will be a casualty of the inward turn dividing countries into competing trading blocs. It is probably too soon to know. We sold Disney (NYSE:DIS), due to some concerns about the increasing capital intensity of its business amid signs of rising competition and slowing growth in streaming media consumption.”

The Walt Disney Company (NYSE:DIS) was held by 112 hedge funds as of Q3 2022.

2. Tesla, Inc. (NASDAQ:TSLA)

Flagged Overvalued by Number of Articles: 4

Tesla, Inc. (NASDAQ:TSLA) is an Austin, Texas-based electric vehicle company.

The premium valuation of the company led by Elon Musk can be gauged by the fact that the market capitalization of Tesla, Inc. (NASDAQ:TSLA) is higher than the market capitalization of the next five automakers combined. Tesla, Inc. (NASDAQ:TSLA) produced only 930,400 vehicles in 2021 and contributed a meager 1.16% to the global auto production of 80 million vehicles.

In a research note issued on December 7, Toni Sacconaghi at Bernstein highlighted that Tesla, Inc. (NASDAQ:TSLA) could be facing a demand problem and has responded by reducing its prices in China and the US. Furthermore, the company has lowered its production in China as well. The price reduction could result in the average selling price (ASP) falling by $1,400 per vehicle. This could result in a contraction in gross profit margin by two percentage points (ppts). The analyst has assigned Tesla, Inc. (NASDAQ:TSLA) stock a target price of $150 along with an Underperform rating.

Baron Funds discussed its outlook on Tesla, Inc. (NASDAQ:TSLA) in its Q3 2022 investor letter. Here’s what the firm said:

“Tesla, Inc. (NASDAQ:TSLA) makes fully electric vehicles (EVs), related software offerings, solar and energy storage products, and battery cells. After a tough second quarter that included a prolonged shutdown of one of Tesla’s key manufacturing facilities in Shanghai, the company demonstrated a significant 40% sequential increase in production volumes resulting in another quarterly record of production and deliveries. Despite the second quarter complexities, inflationary pressures, and production ramp-up of two new facilities (Berlin and Austin), the company exceeded Wall Street expectations in the second quarter. It maintained healthy 26% normalized gross margins, achieved industry-leading 18% adjusted operating income margins, and has generated over $14 billion of cash from operations over the past year. Moreover, due to Tesla’s high level of vertical integration and U.S. manufacturing capacity, the company is expected to be one of the key beneficiaries of the Inflation Reduction Act, qualifying for significant manufacturing and consumer-related incentives. We believe these incentives can add up to tens of billions of dollars over the coming decade, while also enhancing Tesla’s competitive advantage versus other automakers. The company also held its second artificial intelligence day, which presented continued advancements in its vehicle self-driving program and showcased its rapidly evolving humanoid robot developments (check out the Optimus videos on YouTube). We continue to believe Tesla is well positioned to benefit from complementary tectonic shifts in the automotive industry, including electrification, autonomous driving, and shared mobility. And, yes, Tesla is still effectively debt free, with over $18 billion of cash on its balance sheet, and investors are even speculating about a stock buyback, a far cry from worries of bankruptcy just a few years ago.”

1. Shopify Inc. (NYSE:SHOP)

Flagged Overvalued by Number of Articles: 4

Shopify Inc. (NYSE:SHOP) is an Ottawa, Canada-based provider of a globally famous e-commerce platform.

Experts believe that the stock is trading at an inflated valuation, and the company needs to deliver strong bottom-line growth to justify the valuation in an environment of high economic uncertainty. Shopify Inc. (NYSE:SHOP) stock is presently exchanging hands at a forward EV/Sales multiple of 8.20x, reflecting a premium of 221.5% when compared to the sector median forward EV/Sales multiple of 2.55x only. The forward P/S ratio of 8.86x also represents a premium of 246.2% when compared to the sector median of 2.56x.

On December 8, Kunal Madhukar at UBS commenced coverage on Shopify Inc. (NYSE:SHOP) stock with a target price of $30 and a Sell rating. The analyst highlighted that the current forecast for the company’s gross merchandise value (GMV) and revenue still does not incorporate the possibility of a global recession in 2023.

Artisan Partners shared its outlook on Shopify Inc. (NYSE:SHOP) in its Q3 2022 investor letter. Here’s what the firm said:

“Shopify Inc. (NYSE:SHOP) is a leading e-commerce platform supporting over 2 million merchants with software, online storefronts and payments technology. Like Uber, Shopify returned to mid-cap territory during Q2 as the company’s profit cycle and share price have faced significant pressure. Earlier this year, the company began a phase of investments to support a range of future growth drivers, including Shopify Plus for larger brands, logistics services, international expansion, point-of-sale payments and social media-based commerce. With high inflation putting pressure on consumer spending, and with e-commerce activity normalizing after a massive pandemic spike, Shopify’s earnings have fallen sharply. While we have outstanding questions about the likelihood of success for the company’s capital-intensive logistics investments, we decided to take advantage of the stock’s >75% YTD decline and initiate a GardenSM position at a deep discount to our PMV estimate. Our thesis is predicated on our belief there is still a long runway for commerce to move online, and Shopify is well-positioned to win share of this market. The company has created an ecosystem of products (payment processing, financing, shipping, customer engagement tools, etc.), partners (TikTok, Google, Meta), sales channels and over 6,000 apps to help its merchants sell online and establish direct relationships with customers.”

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