Analysts Caution Investors About Expensive Stocks


Summary: Equities are still costly despite higher interest rates, leading analysts to warn investors about certain expensive stocks. JPMorgan’s Marko Kolanovic believes that stocks are facing a difficult situation due to the combination of high valuations, geopolitical risks, and restrictive interest rates. Using CNBC’s Pro stock screener tool, a list has been compiled which includes IBM, Tyson Foods, and Prudential Financial as stocks with high price-earnings ratios and cautious analyst ratings.

The current stock market scenario is presenting a concerning situation for investors as equities continue to remain expensive even in a higher interest rate environment. JPMorgan’s Marko Kolanovic, the firm’s chief global markets strategist, has expressed his concerns about the unsustainable nature of equities climbing higher under these circumstances. He believes that the combination of high valuations on Wall Street, geopolitical turmoil, and restrictive interest rates is creating a challenging picture for stocks.

Based on a list generated by CNBC’s Pro stock screener tool, several expensive stocks with cautious analyst ratings have been identified. IBM, the tech hardware giant, is among these stocks, with a price-earnings ratio that is significantly higher than its five-year average. Analysts have mostly rated IBM as a hold and UBS analyst David Vogt expects the company’s third-quarter results to be below previous forecasts. Tyson Foods, the premier U.S. beef exporter, and Prudential Financial, the life insurer, also made the list. Both companies have price-earnings ratios that are considerably higher compared to their respective five-year averages, and analysts have maintained a consensus rating of hold for both stocks.

Other stocks highlighted by CNBC Pro’s screen include Hewlett Packard Enterprise, health-care products distributor Henry Schein, health insurer Molina Healthcare, and energy holding company Pinnacle West Capital.

Tags: equities, interest rates, high valuations, stocks, IBM, Tyson Foods, Prudential Financial, analysis