Even though benchmark equity indexes are hovering near their all-time highs thanks to impressive corporate earnings, a few fundamentally weak stocks are trading at sky-high valuations. We think Royal Caribbean (NYSE:RCL) and Bill.com (BILL) shares look significantly overvalued at their current prices and are due for a retreat. As such, it could be wise to avoid these names for now. Read on.The resurgence of the COVID-19 cases due to the rapid spread of the highly contagious COVID-19 Delta variant has been fueling market volatility. Also contributing to investor nervousness is that the Federal Reserve could raise interest rates as soon as early 2023, but the timing regarding its tapering activities is still uncertain.
The prolonged period of loose monetary policy, in part, has led to stretched valuations for several fundamentally weak stocks. The stock market got a further boost from solid second-quarter earnings reports. However, along with the possible negative impact on the economic recovery of rising COVID-19 cases, concerns over high inflation have been fostering market volatility. The International Monetary Fund (IMF) warned that inflation could be persistent. As a result, several investors predict a market correction in the near term.
Against this backdrop, we think fundamentally weak stocks Royal Caribbean Group (RCL) and Bill.com Holdings, Inc. (NYSE:BILL) look significantly overvalued at their current price levels and are due for a pullback. So, it’s best to avoid these two stocks now.