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华尔街日报3 Inflated Stocks with Open Questions
Each stock in this article is trading near its 52-week high. These elevated prices usually indicate some degree of investor confidence, business improvements, or favorable market conditions.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. On that note, here are three overhyped stocks that may correct and some you should consider instead.
Zoom (ZM)
One-Month Return: +14.4%
Once the verb that defined remote work during the pandemic ("let's Zoom later"), Zoom (NASDAQ:ZM) provides a cloud-based platform for video meetings, phone calls, team chat, and collaboration tools that helps businesses and individuals connect virtually.
Why Is ZM Risky?
- Offerings struggled to generate meaningful interest as its average billings growth of 3.9% over the last year did not impress
- Competitive market dynamics make it difficult to retain customers, leading to a weak 98% net revenue retention rate
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.6%
Zoom’s stock price of $89.93 implies a valuation ratio of 5.5x forward price-to-sales. Dive into our free research report to see why there are better opportunities than ZM.
Expedia (EXPE)
One-Month Return: +16.3%
Originally founded as a part of Microsoft, Expedia (NASDAQ:EXPE) is one of the world’s leading online travel agencies.
Why Are We Wary of EXPE?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 8.3% over the last three years was below our standards for the consumer internet sector
- Decision to emphasize platform growth over monetization has contributed to 1.7% annual declines in its average revenue per booking
- Excessive marketing spend signals little organic demand and traction for its platform
Expedia is trading at $289.71 per share, or 10.4x forward EV/EBITDA. If you’re considering EXPE for your portfolio, see our FREE research report to learn more.
First Commonwealth Financial (FCF)
One-Month Return: +7.4%
Tracing its roots back to the Great Depression era of 1934, First Commonwealth Financial (NYSE:FCF) is a financial holding company that provides consumer and commercial banking, wealth management, and insurance services across Pennsylvania and Ohio.
Why Does FCF Fall Short?
- 3.2% annual revenue growth over the last two years was slower than its banking peers
- Net interest income trends were unexciting over the last five years as its 8.6% annual growth was below the typical banking firm
- Earnings per share fell by 6.6% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
At $17.30 per share, First Commonwealth Financial trades at 1.1x forward P/B. Check out our free in-depth research report to learn more about why FCF doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
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