Below is a list of Morningstar’s five most overvalued stocks, based on their analysts’ fair value estimates.
It’s never the right time to buy an overvalued stock, as you already know.
here List of Morningstar’s five most valuable stocks, based on analyst estimates of fair value. The comment comes from Dave Sequeira, Senior US Market Analyst at Morningstar. Stocks are listed in order of overvaluation, with overvaluation first.
Square Space (SQSP) – Get a free reportwhich provides software tools for building websites and hosting services, especially for small and start-up businesses.
Morningstar moat rating: None. Morningstar fair value estimate: $19.60. Tuesday’s closing price: $32.30.
“It’s an interesting company,” Sakira said. “It had some very good growth dynamics. The company grew quickly.”
But on the downside, “Over time, we believe that additional competition will limit future growth,” he said. “As such, we believe the market is overly optimistic about the long-term growth rate and margin expansion.”
inspiration (ORCL) – Get a free reportsoftware giant.
Morningstar moat rating: Narrow. Morningstar fair value estimate: $67. Tuesday’s closing price: $96.45.
“We already expect a strong earnings growth rate” of 7%, doubling over the next five years, Skira said. “We also expect strong margin expansion to 39% from 26% over the next five years.”
However, “when we compare our valuation to the market, we think the market is just pricing in a much higher rate of growth and more margin expansion than we would expect.”
nvidia (NVDA) – Get a free reportAnd Semiconductor stalwart.
Morningstar’s trench rating: Broad. Morningstar fair value estimate: $200. Tuesday’s closing price: $276.65.
“Nvidia stock has a history of swinging wildly back and forth from undervalued to overvalued,” Sekera said. “The stock has been up quite a bit this year, and that’s because the market is so excited about the opportunities they have in AI.”
“The company has a very strong presence in the semiconductor industry for AI applications,” said Sekera. “But the rating just got really high.”
Trade office (TTD) – Get a free reportan online advertising platform for advertisers and their agencies to purchase ad inventory.
Morningstar moat rating: None. Morningstar fair value estimate: $46. Tuesday’s closing price: $62.10.
“It’s grown very quickly in the last couple of years since it went public,” said Sequeira. We think he’s starting to develop a network effect. But at this point, we don’t have enough confidence that they’re really going to be able to create that competitive advantage.
Cadence Design Systems (CDNS) – Get a free reporta maker of software for semiconductor companies.
Morningstar moat rating: Narrow. Morningstar fair value estimate: $161. Tuesday’s closing price: $213.75.
“Investors expect this to benefit growth in semiconductors, as they model the software that is used to make AI chips,” Sekera said.
“Again, we agree that the company has a long path of growth. It will benefit from the advent of AI. But the market is ahead of itself at this point.”