Five High-Profile Stocks That Reached All-Time Highs on Monday
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As the market sits at multi-year highs it should come at no surprise that several high profile, closely watched, stocks would also trade at these levels. However, over the last decade the market’s performance has been minimal, while the stocks in this article have performed with great gains. Therefore, as we look at these stocks, and determine what pushed each to new highs, we must wonder how much higher they may trade.
*as of June 03, 2011
- An upgrade from Morgan Stanley was enough to push shares of Amazon to new highs on Monday, as the firm upgraded the stock to “Overweight” with a $325 price target. The firm said that international opportunities will provide the catalyst to justify the valuation; however significant room for U.S. growth still remains. Last year I was somewhat bearish regarding the upside and the valuation of Amazon. But after taking a closer look I’ve realized that comparisons to Walmart are not fair; the company is somewhere in the middle of Ebay and Walmart. When you consider the fact that Amazon is focusing on growth, not profitability, and is about 150% cheaper in terms of price/sales than Ebay, you realize it may not be that expensive. Furthermore, if Walmart’s profit margin of 3.57% is the standard then Amazon could return net income of $4.35 billion if it were to stop spending money on future growth. Therefore, a P/E ratio of 28.0 and a price/sales of 2.05 wouldn’t be expensive for a large cap company growing at 25% year-over-year, making AMZN a “buy.”
- Mastercard added to its five day rally and ended up creating new all-time highs. The company’s stock continues to trend higher thanks to global growth, incredible margins, and efficiency. However, unlike Amazon, I do not believe the stock is a “buy.” It has seen some slowed growth and with a price/sales of 8.78 it’s more expensive than some social media companies. The company’s 30% profit margin hides much of the company’s high valuation, but as an investor, I don’t see the value and I think the risk for a pullback is too great.
- Celgene traded to new highs after a very bullish operational forecast. The company said it expects 2012 income at the high end of prior guidance and for net sales to double over the next four years, to $12 billion. The company’s also gearing up for news regarding three potential blockbuster drugs including its pancreatic cancer drug, Abraxane. Therefore, according to the company’s estimates, it’s trading at 3x 2017’s sales, or 6.50x current sales. The company has strong margins, a large pipeline, and tons of promise. However, it does seem a little pricey for a large cap stock and I believe there are better values elsewhere in the industry.
- 3D Systems and Stratasys are both companies that operate in the 3D printing space. Over the last year both have seen market leading gains as investors believe that the 3D printing market could become the next “must-have” in the households of consumers. Furthermore, strong fundamental gains in the industrial space have helped to fuel this belief; and on Monday 3D Systems unveiled a new consumer friendly device that created even more optimism. My only problem is that these companies are very expensive for the type of products they offer. Both stocks have apparently already priced in a large commercial success. Therefore, with price/sales ratios over 9.50 I do think we may see a pullback in the near future. However, I’ve been trying to call the top of these two stocks for the last year and have been unsuccessful. It would not surprise me if both trade considerably higher, although I doubt it.
When a stock trades at all-time highs it’s being pushed by momentum and a strong uptrend. Therefore, it makes sense that you’d have to pay a higher premium to buy shares of these companies. As a result, if interested, an investor's job is to assess the fundamentals and the growth to determine if the stock is worthy of the premium. Most likely, one or more of these stocks will continue to rally into this new-year, but most likely, one or more will also pullback. It’s you job to determine which ones.
BrianNichols has no position in any stocks mentioned. The Motley Fool recommends 3D Systems, Amazon.com, and Stratasys. The Motley Fool owns shares of 3D Systems, Amazon.com, MasterCard, Inc., and Stratasys and has the following options: Short Jan 2014 $55 Calls on 3D Systems and Short Jan 2014 $30 Puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!