21 Newly Overvalued Stocks this Week

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Once a week, we screen the US-listed stocks under Morningstar’s coverage for newly overvalued names—those whose prices have just climbed into ranges warranting 1- or 2-star

. For the week ended June 26, 21 stocks saw their ratings change to 2 stars, while eight joined the 52 US-listed names in 1-star territory.

The five new 2-star stocks with the largest market capitalization are:

• Merck MRK
• Welltower WELL
• Banco Bilbao Vizcaya Argentaria BBVA
• Chubb Group Holdings CB
• Progressive PGR

The five new 1-star stocks with the largest market capitalization are:

• Johnson & Johnson JNJ
• Ciena CIEN
• Delta Air Lines DAL
• InterContinental Hotels IHG
• Packaging Corporation of America PKG

The full lists of new 2- and 1-star stocks can be found at the bottom of this story. All returns in this article are reported in the stock’s base currency, and all data is sourced from Morningstar Direct.

What Is the Morningstar Rating for Stocks?

The Morningstar Rating can help investors identify stocks that are truly undervalued or overvalued, cutting through the market noise. The rating is determined by three factors: a stock’s price, its

—Morningstar’s estimate of its intrinsic worth—and its , which captures the range of potential outcomes for that estimate. Stocks rated 4 or 5 stars are considered undervalued, those rated 3 stars are fairly valued, and the ones rated 1 or 2 stars are considered overvalued.

The Latest Stock Valuation Changes

The Morningstar US Market Index fell 1.76% over the past week as of June 26, leaving the overall US stock market significantly undervalued, hovering at an 11.00% discount to its fair value estimate on a market cap-weighted basis.

Of the 874 US-listed stocks covered by Morningstar analysts:

• 39% are undervalued, 37% are fairly valued, and 23% are overvalued.
• 22 are newly undervalued.
• 21 are newly overvalued.
• Eight moved from a 2-star rating to a 1-star rating.
• Eight moved from a 1-star rating to a 2-star rating.
• None of the newly overvalued stocks jumped from a 3-star rating to a 1-star rating.
• 17 are no longer overvalued.

Metrics for This Week’s New 2-Star Stocks

Merck

• Morningstar Rating: ★★
• Fair Value Estimate: $111.00
• Uncertainty Rating: Medium

Following a 12.99% gain over the past week, drug manufacturer Merck saw its Morningstar Rating move to 2 stars from 3. Merck has gained 8.98% over the past three months and 68.70% over the past year. The large-value stock has a wide economic moat. Merck is trading at a 16% premium to its fair value estimate of $111 per share, with an Uncertainty Rating of Medium.

Welltower

• Morningstar Rating: ★★
• Fair Value Estimate: $192.00
• Uncertainty Rating: Medium

Healthcare facilities REIT Welltower climbed 10.01% over the past week, bumping its Morningstar Rating to 2 stars from 3. The company’s stock is up 16.65% over the past three months and 50.39% over the past year. The stock’s price is 18% above its fair value estimate of $192 per share, with an Uncertainty Rating of Medium. The large-core stock has no economic moat.

Banco Bilbao Vizcaya Argentaria

• Morningstar Rating: ★★
• Fair Value Estimate: $21.00
• Uncertainty Rating: High

Following a 0.45% loss over the past week, diversified bank BBVA saw its Morningstar Rating move to 2 stars from 3. BBVA has gained 20.13% over the past three months and 70.87% over the past year. The large-core stock has a narrow economic moat. BBVA is trading at a 16% premium to its fair value estimate of $21 per share, with an Uncertainty Rating of High.

Chubb Group Holdings

• Morningstar Rating: ★★
• Fair Value Estimate: $297.00
• Uncertainty Rating: Medium

Property and casualty insurance firm Chubb gained 5.58% over the past week, shifting its Morningstar Rating to 2 stars from 3. Chubb has climbed 5.61% over the past three months and 21.94% over the past year. The stock is trading at a 15% premium to its fair value estimate of $297 per share, with an Uncertainty Rating of Medium. Chubb is a large-core company with a narrow economic moat.

Progressive

• Morningstar Rating: ★★
• Fair Value Estimate: $191.00
• Uncertainty Rating: Medium

Property and casualty insurance firm Progressive climbed 9.50% over the past week, bumping its Morningstar Rating to 2 stars from 3. The company’s stock is up 10.62% over the past three months and is down 8.63% over the past year. The stock’s price is 17% above its fair value estimate of $191 per share, with an Uncertainty Rating of Medium. The large-value stock has a narrow economic moat.

Metrics for This Week’s New 1-Star Stocks

Johnson & Johnson

• Morningstar Rating: ★
• Fair Value Estimate: $190.00
• Uncertainty Rating: Low

Drug manufacturer Johnson & Johnson gained 11.5% over the past week, shifting its Morningstar Rating to 1 star from 2. Johnson & Johnson has climbed 7.07% over the past three months and 71.71% over the past year. The stock is trading at a 34% premium to its fair value estimate of $190 per share, with an Uncertainty Rating of Low. Johnson & Johnson is a large-value company with a wide economic moat.

Ciena

• Morningstar Rating: ★
• Fair Value Estimate: $270.00
• Uncertainty Rating: Very High

Following a 11.98% gain over the past week, communication equipment firm Ciena saw its Morningstar Rating move to 1 star from 2. Ciena has gained 23.59% over the past three months and 488.27% over the past year. The mid-growth stock has a narrow economic moat. Ciena is trading at a 78% premium to its fair value estimate of $270 per share, with an Uncertainty Rating of Very High.

Delta Air Lines

• Morningstar Rating: ★
• Fair Value Estimate: $48.00
• Uncertainty Rating: Very High

Airline Delta climbed 9.97% over the past week, bumping its Morningstar Rating to 1 star from 2. The company’s stock is up 38.82% over the past three months and 91.30% over the past year. The stock’s price is 93% above its fair value estimate of $48 per share, with an Uncertainty Rating of Very High. The mid-core stock has no economic moat.

InterContinental Hotels Group

• Morningstar Rating: ★
• Fair Value Estimate: $125
• Uncertainty Rating: Medium

Lodging company InterContinental gained 1.07% over the past week, shifting its Morningstar Rating to 1 star from 2. InterContinental has climbed 31.64% over the past three months and 52.72% over the past year. The stock is trading at a 38% premium to its fair value estimate of $125 per share, with an Uncertainty Rating of Medium. InterContinental is a large-growth company with a wide economic moat.

Packaging Corporation of America

• Morningstar Rating: ★
• Fair Value Estimate: $167.00
• Uncertainty Rating: Medium

Following a 5.47% gain over the past week, packaging and containers company Packaging Corporation saw its Morningstar Rating move to 1 star from 2. Packaging Corporation has gained 14.36% over the past three months and 31.89% over the past year. The mid-core stock has no economic moat. Packaging Corporation is trading at a 45% premium to its fair value estimate of $167 per share, with an Uncertainty Rating of Medium.