In this article, we discuss 5 stocks that analysts think are overvalued. If you want our detailed analysis of these stocks, go directly to Analysts Think These 10 Stocks Are Overvalued.
5. Moderna, Inc. (NASDAQ:MRNA)
Number of Hedge Fund Holders: 49
Moderna, Inc. (NASDAQ:MRNA) is a Massachusetts-based biotechnology company focused on creating therapeutics and vaccines to treat infectious and rare diseases, immuno-oncology, cardiovascular diseases, and auto-immune diseases. The company missed on earnings and revenue consensus in Q3 2021.
Bank of America analyst Geoff Meacham stated on August 11 that he believes that Moderna, Inc. (NASDAQ:MRNA) is “ridiculously” overvalued, and the business model does not reconcile with the valuation. He stated that the valuation assumes that the Moderna, Inc. (NASDAQ:MRNA) pipeline will be completely successful, and COVID-19 vaccine sales will reach a billion units till 2038, which are not safe assumptions. The analyst called for a 75% pullback on the stock, and over the last 6 months, Moderna, Inc. (NASDAQ:MRNA) shares have dropped roughly 67%, in line with Meacham’s forecast.
Piper Sandler analyst Edward Tenthoff believes the FDA’s full approval today of Spikevax “broadly de-risks Moderna’s rich mRNA vaccine pipeline.” He reiterated on January 31 an Overweight rating on Moderna, Inc. (NASDAQ:MRNA) shares with a $348 price target.
In Q3 2021, 49 hedge funds were bullish on Moderna, Inc. (NASDAQ:MRNA), up from 37 funds in the prior quarter. Billionaire Philippe Laffont’s Coatue Management is the biggest Moderna, Inc. (NASDAQ:MRNA) stakeholder, with more than 6 million shares worth $2.32 billion.
Here is what Carillon Tower Advisers has to say about Moderna, Inc. (NASDAQ:MRNA) in its Q3 2021 investor letter:
“Moderna is a biotechnology company pioneering messenger RNA (mRNA) therapeutics and vaccines. The stock proved to be an impressive contributor once again in the quarter, as investors continue to evaluate the potential for future growth driven primarily by the firm’s revolutionary COVID-19 vaccine. Strong global demand for the vaccine may persist for the foreseeable future in order to maintain immunity as well as provide protection against any additional future variants. The potential for the firm’s mRNA technology to be used in a number of other use cases, specifically influenza, could also provide an additional tailwind for future growth.”
4. Accenture plc (NYSE:ACN)
Number of Hedge Fund Holders: 56
Accenture plc (NYSE:ACN) is a Dublin-based professional services company that provides strategy, consulting, technology, and operations services worldwide. At the end of the third quarter of 2021, 56 hedge funds were bullish on Accenture plc (NYSE:ACN), up from 52 funds in the quarter earlier. Nicolai Tangen’s Ako Capital held the leading stake in Accenture plc (NYSE:ACN), owning a position worth $718.7 million.
On December 16, Accenture plc (NYSE:ACN) reported earnings for the quarter ending November 2021. The company posted an EPS of $2.78, beating estimates by $0.15. Revenue over the period jumped 27.23% year-over-year to $14.97 billion, surpassing estimates by $746.51 million.
Goldman Sachs analyst Brian Essex on January 9 initiated coverage of Accenture plc (NYSE:ACN) with a Neutral rating and a $446 price target. The analyst views Accenture plc (NYSE:ACN) as among the best positioned to benefit from IT services spending “tailwinds” with an ability to maintain a “better quality fundamental profile with more favorable return on invested capital than many of its peers.” However, the stock currently trades at a historical premium, the analyst told investors in a research note.
Similarly, BMO Capital analyst Keith Bachman on December 17 raised the price target on Accenture to $460 from $385 but kept a Market Perform rating on the shares. The analyst stated that while Accenture plc (NYSE:ACN) should retain its leading market position and maintain double-digit growth into FY23, valuation on the stock keeps him on the sidelines.
Here is what Polen Global Growth has to say about Accenture plc (NYSE:ACN) in its Q3 2021 investor letter:
“Accenture continues to perform well as the business has grown through the pandemic. Accenture has benefited as businesses around the world have sought a trusted partner to enable their digital transformation. Those leading in the new world are accelerating investment, while those lagging are investing to close the gap. These are two great examples of the pandemic accelerating trends that were already in motion, making leaders more resilient.”
3. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 106
Netflix, Inc. (NASDAQ:NFLX) is a California-based entertainment services and original production company. Michael Pachter from Wedbush Securities stated on October 16 that despite the solid business fundamentals of Netflix, Inc. (NASDAQ:NFLX), the stock is trading at 9-times its revenue, whereas his targets are about 5-times the revenue. He does not believe that Netflix, Inc. (NASDAQ:NFLX) is a worthless stock, but simply stated that the shares are overvalued, since the audience will never convert fully to streaming, so the company cannot entirely dominate the sector.
On January 20, Netflix, Inc. (NASDAQ:NFLX) reported earnings for the fourth quarter, posting an EPS of $1.33, beating estimates by $0.51. The company’s revenue for the period totaled $7.71 billion, up 16% year-over-year, outperforming estimates by $2.24 million.
Citi analyst Jason Bazinet upgraded Netflix, Inc. (NASDAQ:NFLX) on January 31 to Buy from Neutral with a price target of $450, down from $595. Subscriber-based stocks have come under significant pressure and the equity returns now lag the S&P 500 Index since January 2020, the analyst tells investors in a research note. However, his enterprise value per subscriber analysis suggests prevailing equity values don’t assume material sub growth or improving subscriber economics beyond 2023. He believes Netflix, Inc. (NASDAQ:NFLX) has “ample pricing power.”
According to the Q3 database of Insider Monkey, 106 hedge funds held long positions in Netflix, Inc. (NASDAQ:NFLX), down from 113 funds in the quarter earlier. Fisher Asset Management held a $2.5 billion stake in Netflix, Inc. (NASDAQ:NFLX) in the third quarter.
Here is what Rowan Street Capital has to say about Netflix, Inc. (NASDAQ:NFLX) in its Q4 2021 investor letter:
“It’s always good to remind ourselves of what we are trying to really do here in the first place?
As we constantly repeat this in almost all annual letters, our goal from day one was to compound our investor’s capital at double-digit returns over the long run.
Now, everyone loves outsized returns. We could compare a strong track record of long-term returns to a fit body. Both need a lot of patience, discipline and both require you to “pay the price.” The reality is that the majority of people lack patience, lack discipline and are just not willing to “pay the price.” We all know what paying the price in fitness really means, but let’s take a look at what that means in investing.
Let’s look at an example of Netflix stock performance since 2010 and compare that to the S&P 500 index. As you can tell from the chart below, the difference over the past 12 years has been absolutely staggering and leaves anyone salivating over these kinds of returns (6,981% for NFLX vs. 312% for the S&P 500).
(Click here to see the charts)
With that, now let’s take a look at the “Cost of Admission” in order to generate these kinds of returns. We want to show you the painful drawdowns over the same time period since 2010. Here, you had a couple of 80% drawdowns back in the 2011-2013 time period, a bunch of 40% drawdowns, and countless 20%+ drawdowns.
So, the question is how many people do you think actually were able to withstand the volatility of Netflix stock over the last 12 years, pay the price and hold it all the way through? During the investment period shown above, Netflix was up almost seventy-fold, and this volatility is the price you had to pay to get it. A lot of market participants are striving for these outsized returns, but just don’t want to pay that price. It seems too risky and they try to cling towards safety without realizing that this is the cost of admission for above average returns.
The good news is that at Rowan Street we do have the patience, the discipline and are very willing to ’pay the price’ in order to achieve the long-term results we have outlined. All that we ask of you, our Limited Partners, is to trust our process and to allow us to do what we do best — compound your hard-earned capital over time. If you can do that, our partnership will work like magic — we are confident in that! In addition, you should derive some comfort in that the majority of our net worth is invested in Rowan Street alongside you (we like to eat our own cooking). We want our partners’ financial fortunes to move in lockstep with ours.”
2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 120
On November 4, The Satori Fund’s Dan Niles called Apple Inc. (NASDAQ:AAPL) “the most overpriced tech stock”, reasoning that its growth as a big-cap tech stock relative to its multiples does not make sense. In Q3 2021, Apple Inc. (NASDAQ:AAPL)’s 5-year compounded revenue growth came in at roughly 11%, whereas other mega-cap tech companies like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Amazon.com, Inc. (NASDAQ:AMZN) reported revenue growth of 15%, 23%, and 28% over the period, respectively.
Apple Inc. (NASDAQ:AAPL) declared on January 27 a $0.22 per share quarterly dividend, in line with previous. The dividend will be paid on February 10, to shareholders of record on February 7.
Apple Inc. (NASDAQ:AAPL) published its Q4 results on January 27, posting earnings per share of $2.10, beating estimates by $0.21. The revenue jumped 11.22% from the prior-year quarter to roughly $124 billion, surpassing estimates by $5.41 billion.
Credit Suisse analyst Sami Badri raised the price target on Apple Inc. (NASDAQ:AAPL) on January 31 to $168 from $150 and kept a Neutral rating on the shares. The analyst noted that Apple Inc. (NASDAQ:AAPL)’s Q4 revenue of $123.9 billion came in ahead versus Street consensus, despite supply constraints that were worse than Q3, while EPS of $2.10 was also above consensus of $1.90. Q1 2022 should set a March-quarter revenue record whilst supply remains constrained, Badri added, but he pointed that growth should decelerate on tough comparisons.
Hedge fund sentiment decreased around Apple Inc. (NASDAQ:AAPL) in Q3 2021. Insider Monkey’s third quarter database suggested that 120 hedge funds were bullish on Apple Inc. (NASDAQ:AAPL), down from 138 funds in the preceding quarter. Berkshire Hathaway is the leading stakeholder of the company, with more than 887 million shares worth $125.5 billion.
Here is what Alger Spectra Fund has to say about Apple Inc. (NASDAQ:AAPL) in its Q4 2021 investor letter:
“Apple is a leading technology provider in telecommunications, computing and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives tight engagement with consumers and enterprises, fostering the growing purchases of high-margin services like music, apps and Apple Pay. Apple’s quarterly earnings exceeded street estimates on strong margin realization driven by a sales mix of more profitable services. The margin strength was even more impressive given significantly higher freight costs and supply constraints that prevented approximately $6 billion in revenue realization.”
1. Meta Platforms, Inc. (NASDAQ:FB)
Number of Hedge Fund Holders: 248
Meta Platforms, Inc. (NASDAQ:FB) is the parent organization of Facebook, Instagram, and WhatsApp, among other subsidiaries. According to Steve Weiss of Short Hills Capital Partners on February 4, Meta Platforms, Inc. (NASDAQ:FB) is an overvalued stock and he has cut his position by more than half, and is looking to unload the rest of his shares. He believes that over the years, Meta Platforms, Inc. (NASDAQ:FB) has become a “hated company” and Facebook users are declining, and investors have better options to invest in tech now. He believes that the metaverse is too far ahead in the future to redeem Meta Platforms, Inc. (NASDAQ:FB), and the stock will be a “sinkhole” in the meantime.
On February 2, Meta Platforms, Inc. (NASDAQ:FB) reported earnings for Q4 2021. The company posted an EPS of $3.67, missing estimates by $0.15. Revenue over the period gained roughly 20% year-over-year, reaching $33.67 billion, exceeding estimates by $230.60 million.
KGI Securities analyst Freddy Chen on February 9 downgraded Meta Platforms, Inc. (NASDAQ:FB) to Neutral from Outperform with a $270 price target.
Among the hedge funds tracked by Insider Monkey in Q3 2021, 248 funds were bullish on Meta Platforms, Inc. (NASDAQ:FB), down from 266 funds in the quarter earlier. Eagle Capital Management held a prominent stake in Meta Platforms, Inc. (NASDAQ:FB) in the third quarter, with more than 7 million shares worth $2.4 billion.
Here is what Weitz Investment Management has to say about Meta Platforms, Inc. (NASDAQ:FB) in its Q4 2021 investor letter:
“A couple of other platform companies deserve a mention as well. Meta Platforms and Alphabet have both been under regulatory scrutiny that has affected their valuations. The threats of punitive action are real, but we have tried to be imaginative about how onerous any fines, rule changes or forced divestitures might be, and we believe that the five year outlook for each is well above average under almost any scenario. So, we include these two in the list of the under-appreciated.”
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