Is this a normal rally or are stocks looking bubblicious?


In the last couple of weeks, several stocks have soared to new all time highs based on better-than-expected earnings reports. There's nothing new about that but the stocks were already the darling of investors and had seen big gains in 2013.

On the investor chat boards and message boards like Stocktwits, there were suddenly a lot of mentions of it "feeling like 1999" and some investors tweeted out that they were having "flashbacks" to the end of the dot-com era when stocks soared for no reason and investing was "easy."

Take a look at the year to date returns for these 4 stocks, all of which are Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy).

  1. Restoration Hardware (RH) - up 100%
  2. LinkedIn (LNKD) - up 107%
  3. Yelp (YELP) - up 163%
  4. Tesla (TSLA) - up 332%

Here's the 52-week chart of all four stocks along with the S&P 500 for the same time period. The S&P 500 hasn't been a slouch in the last 52 weeks either. (It's the flat line at the bottom.) It has returned 20.5% in that time. But these stocks blow it away.

Only LinkedIn and Restoration Hardware are expected to be profitable this year. That means Tesla and Yelp don't have forward P/Es because no earnings = no price/earnings ratio.

The other two companies with earnings aren't exactly cheap. Restoration Hardware trades with a forward P/E of 44 and LinkedIn has a forward P/E of 665. The average P/E of the S&P 500 is 15.5.

Are some stocks reminding you of the bubble year of 1999?

Or are these gains a normal part of a big bull market stock rally?


Read the analyst report on TSLA

Read the analyst report on YELP

Read the analyst report on LNKD

Read the analyst report on RH

Zacks Investment Research

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