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The Stock of Microsoft is One of the Most Overbought on Wall Street. Here Are the Others

June 23, 2024
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The S&P 500 concluded the week with a modest gain, but certain stocks may be on the brink of a pullback, based on one market metric.

Despite the overall positive performance, with the broad market index posting a 0.6% weekly gain, concerns grew as the rally driven by artificial intelligence showed signs of weakness. Notably, shares of AI leader Nvidia fell 4% over the week, raising alarms about the potential overextension of the tech-heavy market.

To address this, CNBC Pro utilized its stock screener tool to identify the most overbought and oversold stocks on Wall Street, using the 14-day relative strength index (RSI) as a key metric.

A 14-day RSI above 70 indicates that a stock is overbought and might soon experience a pullback. Conversely, an RSI below 30 suggests an oversold stock, potentially poised for a rebound.

Among the overbought stocks this week was Microsoft, with an RSI of 74. The tech giant has benefited significantly from artificial intelligence, with Jefferies recently naming it a “Top AI Pick Going for AI Gold, Not Silver.”

“MSFT is proud of how it has been able to push the throttle on AI investments, setting themselves up to win the long-term opportunity while still delivering operating leverage over the past few years,” Jefferies analyst Brent Thill wrote in a June 13 report.

Even with a nearly 20% rise in shares this year, consensus price targets from LSEG indicate an additional 9% upside.

Corning, a manufacturer of specialty glass for mobile phones and computers, has surged 31% in 2024. However, its RSI reading of 74 suggests it may be due for a decline. Consensus price targets imply a potential 4% drop, according to LSEG.

Earlier this month, Morgan Stanley analyst Meta Marshall downgraded Corning to equal weight from overweight, though she raised her price target to $38 from $35.

“We like GLW’s positioning to participate in many mega trends in the coming years, but think current valuation captures the bulk of expected near-term upside to estimates. We are moving away from our overweight rating given our view of a more balanced risk-reward,” she wrote on June 13.

On the flip side, American Airlines, with an RSI of 29, is one of Wall Street’s most oversold stocks.

Shares have plummeted nearly 19% year to date. The stock dropped more than 13% in a single day last month after the U.S. carrier cut its second-quarter earnings and revenue guidance, marking the biggest daily drop since the early days of the COVID-19 pandemic. Concurrently, the airline announced the departure of its chief commercial officer, Vasu Raja.

Despite these setbacks, Morgan Stanley remains optimistic about the stock’s future. Analyst price targets suggest a potential 37% upside, according to LSEG.

“We had called AAL possibly the cleanest domestic story in Airlines about a month ago, but following the big 2Q guidance cut and announced management changes last week, AAL moves firmly into the ‘show-me’ penalty box, at least for the short term. However, we believe that numbers and positioning have reset enough, and the stock is cheap enough to make the risk-reward look attractive and remain overweight,” Morgan Stanley analyst Ravi Shanker wrote.

With an RSI of about 19, real estate data firm CoStar Group is also among the most oversold stocks. Earlier this week, JMP Securities reiterated its market outperform rating on the stock, raising its price target to $110. This implies that CoStar shares could rise nearly 49% from their Friday closing price.

JMP analyst Nicholas Jones expressed increased bullishness after meeting with the company’s investor relations team.

“Third-party data and web-scraped data appear to be creating noise around prevailing trends at Homes.com, from the company’s perspective, and have pressured the share price. We do not view the call as thesis-changing and believe CSGP has ample profitability to continue investing in its Homes.com business,” he wrote.

CoStar has slipped 15% in 2024, but average analyst consensus suggests shares could rally 42% moving forward, according to LSEG.

Cathy Hills
Associate Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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