CHICAGO, April 8, 2014 /PRNewswire/ --Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Facebook, Inc. (Nasdaq:FB-Free Report), Tesla Motors, Inc. (Nasdaq:TSLA-Free Report), Amazon.com Inc. (Nasdaq:AMZN-Free Report), Netflix, Inc. (Nasdaq:NFLX-Free Report) and Alexion Pharmaceuticals, Inc. (Nasdaq:ALXN-Free Report).
Today, Zacks is promoting its 'Buy' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday's Analyst Blog:
Momentum Slide to Continue for Netflix, Facebook?
It was rough sailing for stocks on Friday with all major indices taking losses. The Dow lost 0.96% while the S&P 500 shed 1.25% by the end of the trading day. But the biggest sufferer was the Nasdaq, which closed the day 2.6% lower.
Internet, Biotech Stocks Take a Hit
This is the tech-heavy index's highest daily percentage loss since February. The decline comes right after Thursday's loss of 1%. The index is now 5% lower than its highest close this year, a milestone achieved on March 5.
More importantly, it was a cruel day for momentum stocks. Facebook, Inc. (Nasdaq:FB-Free Report) and electric car maker Tesla Motors, Inc. (Nasdaq:TSLA-Free Report) plunged 4.6% and 5.9%, respectively.
Meanwhile, Amazon.com Inc. (Nasdaq:AMZN-Free Report) and Netflix, Inc. (Nasdaq:NFLX-Free Report) also plummeted. The stocks lost 3.2% and 4.9%, respectively.
March's Trend Continues
This is a trend which has been continuing over the last month. Several big names have lost more than 20% during that period. The Street defines a drop of more than 20% or greater as a bear market and it seems that these stocks have descended into one which is their very own.
For instance, Alexion Pharmaceuticals, Inc. (Nasdaq:ALXN-Free Report) is 23% lower than its intraday high achieved on February 25. Meanwhile, Facebook has plummeted from the intra-day record achieved less than a month ago, losing 22% over the period. Yet the social media giant has still gained 3.8% this year, while Alexion is up 7% over the same period.
Are They Grossly Overvalued?
When using traditional valuation metrics, most of the momentum stocks seem grossly overvalued. The forward price-to-earnings ratios (P/E) for Amazon for the current financial year (F1) is 184.75. Netflix has a relatively modest P/E (F1) of 80.25. Tesla stands in between the two at 162.
Several momentum stocks fare no better when using other valuation metrics. Facebook has a P/E (F1) of 56.53, while its price to sales ratio is 17.76. The S&P 500 has an overall price to sales ratio of 1.7, which probably makes the social networking giant the most expensive stock on the index.
Investors Grow Wary
The high valuation of these stocks seems to be the primary reason for investors growing wary of them. The fact that most of them are priced well above the market average are keeping away potential buyers, probably rightly so. Momentum stocks grow on bullish expectations and this seems to be in short supply.
Further, there remains a possibility that when these stocks do rally, investors will sell. This is in order to make up for the losses suffered in the interim since those holding these stocks may feel at this point that they were picked up at the wrong time.
Today, Zacks is promoting its 'Buy' stock recommendations. Get #1Stock of the Day pick for free.
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