Are We in a Stock Market Bubble? These 3 Stocks Say Yes
The biggest question in investor’s minds right now is whether the market stock markets a huge bubble right now?
The recovery in equities this year made a lot of investors in a surprise state. According to data, the economy will come back to life, as the federal government had stepped in to provide unprecedented levels of support and boost investor confidence, and the numbers of new daily COVID-19 diagnoses were steadily declining.
Fast-forward to July and the U.S. economic recovery appears to be grinding to a halt as new COVID-19 infections spike to new highs across much of the country. However, the stock market has held on to its gains. The Nasdaq is now up more than 17% for the year and is setting new all-time highs. Even the S&P 500 is only down by about 2% year to date.
So is the stock market bubble is about to pop?? It is very hard to predict it right now but several stocks have started to look seriously overinflated in recent weeks. Among the bubbliest are Nikola, Genius Brands and lot more
Nikola: A car company with no miles
Nikola is a company that took its name from the same inventor as Tesla, has yet to manufacture any cars, but the company has enjoyed riding in Tesla’s wake. Nikola aims to build electric and combination hydrogen fuel cell/electric trucks, but without a product, a track record, or results, the company is being judged on purely what’s possible. Until its vehicles are on the highway, bets on Nikola are purely speculative. Could the stock be a winner from here? Sure, but it’s already priced for perfection, meaning shares are more likely to head south.
Genius Brands: A new name in children’s entertainment
Genius Brands makes animated shows like Superhero Kindergarten, Llama, Llama, and Secret Millionaires Club for distribution on a wide variety of platforms, including Netflix. The stock soared earlier this year as it launched the Kartoon Channel and brought on Arnold Schwarzenegger as both an investor and a voice for Superhero Kindergarten. Its share price went from a low point around $0.25 in April to briefly over $11 in early June, though shares have since pulled back to below $3. Still, after a secondary stock offering, its market cap has remained high, hitting $800 million at the beginning of July, giving it a price-to-sales ratio of more than 100.
When will the bubble burst?
It’s impossible to say when this stock market bubble will pop, but the upcoming earnings season will reveal the ugliest quarterly results investors have seen since at least the financial crisis, and management will have a hard time sounding optimistic given the resurgence in coronavirus cases. Rising infections have put the brakes on the economic recovery and data will soon show how the recovery is plateauing. That means that the stock market could look a lot different by the end of July.