Shares of Twitter, Netflix, Chipotle, Under Armour and TripAdvisor have two clear things in common. First, they’re all among the S&P 500’s best-performing stocks of 2018. Second, they’re all trading well above their average analyst price targets.
If those Wall Street price targets are any indication, they could be due for a pullback.
Netflix, the second-best performer in the S&P 500, has gained 105 percent so far this year, putting it 15 percent above its average price target. New S&P 500 member Twitter, up 95 percent in the year to date, is at a 44 percent premium to its average price target; TripAdvisor, up 68 percent, is at a 24 percent premium; Chipotle, up 60 percent, is at a 19 percent premium; and Under Armour, up 63 percent, is at a 45 percent premium.
Ari Wald, head of technical analysis at Oppenheimer, sees the biggest pullback risk in Under Armour, a stock that trades around 45 percent higher than its average price target.
“It’s the one from the list that’s coming into the most amount of resistance,” Wald said Thursday on CNBC’s “Trading Nation.” “For Under Armour it’s really a range of resistance. It starts at around $24 and extends up to $28.”
This “formidable resistance range” should present a challenge to Under Armour in rallying higher, said Wald. This bearish gap was formed when Under Armour shares plummeted 27 percent in January 2017 following a disappointing quarterly performance and shake-ups to its C-suite.
Stacey Gilbert, market strategist at Susquehanna, shares in Wald’s bearish assessment of Under Armour.
“Overall we feel like they’re not going to meet fiscal year 2018 consensus, 2019 estimates are too high and eventually when investors realize what their trajectory looks like it will come back from its multiple that seems to be a bit extended here,” Gilbert said on “Trading Nation.”
A steep run-up in its price this year has put Under Armour’s price-earnings ratio at 99.5 times forward earnings, well above a 16.6 multiple on the S&P 500.
“From an options perspective, the flow continues to be balanced so this is an exception in terms of the names on the list as well, that it’s not bullish,” Gilbert said.
