{"id":238727,"date":"2026-02-04T13:12:08","date_gmt":"2026-02-04T18:12:08","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=238727"},"modified":"2026-02-05T04:00:03","modified_gmt":"2026-02-05T09:00:03","slug":"stocks-priced-to-perfection-require-um-perfection","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/ibkr-market-insights\/stocks-priced-to-perfection-require-um-perfection\/","title":{"rendered":"Stocks Priced to Perfection Require, um, Perfection"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Yesterday afternoon I was asked to provide <a href=\"https:\/\/nam02.safelinks.protection.outlook.com\/?url=https%3A%2F%2Fwww.investing.com%2Fnews%2Fearnings%2Famd-tops-quarterly-estimates-revenue-guidance-beats-expectations-4482918&amp;data=05%7C02%7Cssosnick%40interactivebrokers.com%7C42696e7b27004fda75ae08de636ece3c%7C7abd04ef837d48e69ba869d84f65a110%7C0%7C0%7C639057524733209065%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&amp;sdata=l6OhO27czwjpOGqdRLNOzC2iiL2V%2BTdTn0BqHWXA4DA%3D&amp;reserved=0\">a quick comment<\/a> about the initial market reaction to AMD\u2019s earnings.&nbsp; The questioner was understandably perplexed.&nbsp; The stock beat expectations for EPS and revenues, and offered positive revenue guidance for the coming quarter, yet it was trading about -5% lower.&nbsp; Today we see AMD trading more than -16% lower, and PLTR, yesterday\u2019s darling, is down about -12% after a +7% post-earnings bump.&nbsp; This is what happens when rotation meets stratospheric valuations.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Indeed, as I type this around noon ET, we have the S&amp;P 500 (SPX) trading about -0.3% lower and the Nasdaq 100 (NDX) down a significant -1.7%.&nbsp; Even though I view the Dow Jones Industrials (INDU) as the market\u2019s version of Jurassic Park, that average\u2019s 0.6% rise offers a prima facie \u201ctell\u201d about the rotation that once again is occurring apace.&nbsp; NDX is of course heavily weighted with technology stocks, while INDU\u2019s archaic price-weighted averaging means that it is underweight that key sector.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A look at the sectoral movements within SPX makes the rotation obvious.&nbsp; Only three sectors are substantially lower: Consumer Discretionary (-0.73%), Communications Services (-1.36%), and Information Technology (-2.23%).&nbsp; Energy, Real Estate, Consumer Staples, Materials, Health Care, and Financials are all up more than +1%, while Utilities and Industrials are essentially flat.&nbsp; The surface of the market is not exactly placid, but a deeper view of the key benchmark (SPX) reveals significant undercurrents.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In the specific cases of AMD and PLTR, this is the danger of high valuation.&nbsp; AMD came into yesterday\u2019s report with a P\/E exceeding 100.&nbsp; Thanks to a good quarter and a big price drop, that is down to a \u201cmere\u201d 79.&nbsp; Although its forward P\/E, now in the 30s, was more reasonable, the huge spread between the backward- and forward-looking measures shows just how much enthusiasm was priced into shares.&nbsp; Very good was not good enough.&nbsp; Great was required.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">As for PLTR, that stock understandably had a very positive initial reaction to Monday afternoon\u2019s report.&nbsp; They too reported a great quarter and solid guidance.&nbsp; Investors were justifiably exuberant, and the stock ran up over +10% at its best level yesterday.&nbsp; Fading to just under +7% by the close didn\u2019t seem too problematic, but it did indicate that some of the enthusiasm was curbed.&nbsp; A few sentences that I wrote last week to someone who asked about PLTR\u2019s valuation summed up the risks:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>\u2026 the &#8220;tell&#8221; is in PLTR&#8217;s PEG ratio as much as it is in its P\/E.&nbsp; The 397 trailing P\/E is staggering, but so is its [forward P\/E] of 230 and its PEG of 4.72.&nbsp; (I typically consider somewhere in the 1 range to be a value.)&nbsp; The PEG means that the market is pricing in about 85% growth.&nbsp; Could that be achievable by PLTR?&nbsp; Maybe, especially if the administration continues to favor it with contracts, but that is an incredibly high hurdle for guidance!<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Thus, for PLTR investors, merely great was not good enough.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Tonight, we get to pore over another key company\u2019s earnings when Alphabet (GOOGL, GOOG) reports after the close.&nbsp; Alphabet is famously sparse with forward guidance, so there is a bit more uncertainty than with other similarly hefty companies.&nbsp; Despite that, GOOGL is not always a big mover after results, with a 6-quarter average move of 3.4% (+2.52%, +1.02%, +1.68%, -7.29%, +2.82%, -5.04%).&nbsp; The 6.88% daily implied volatility that is priced into at-money options seems like adequate compensation for the risk.&nbsp; Skews are flattish, perhaps unsurprisingly after the stock\u2019s recent big run, though with a slight asymmetry to the downside:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>Skews for GOOGL Options Expiring February 6<sup>th<\/sup> (top), February 13<sup>th<\/sup> (middle), February 20<sup>th<\/sup>, 2026 (bottom)<\/em><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"729\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-31-1100x729.png\" alt=\"\" class=\"wp-image-238729 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-31-1100x729.png 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-31-700x464.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-31-300x199.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-31-768x509.png 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-31.png 1400w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/729;\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Source: Interactive Brokers<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The flattish skew is reflected in the symmetrical probability curve that peaks with at-money options:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>IBKR Probability Lab for GOOGL Options Expiring February 6<sup>th<\/sup>, 2026<\/em><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"342\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-32-1100x342.png\" alt=\"\" class=\"wp-image-238728 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-32-1100x342.png 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-32-700x218.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-32-300x93.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-32-768x239.png 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-32-1536x477.png 1536w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/02\/image-32.png 1580w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/342;\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Source: Interactive Brokers<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">GOOGL shareholders have an advantage over those of AMD and PLTR.&nbsp; Its valuations are much more reasonable.&nbsp; The stock is not necessarily a bargain with a 38 P\/E, a 31 forward P\/E, and a PEG ratio of 1.9, but those remain well below the stratosphere even after its stellar run in recent months.&nbsp; Hopefully for investors, GOOGL\u2019s hurdle is not as high.<em><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Yesterday afternoon I was asked to provide a quick comment about the initial market reaction to AMD\u2019s earnings.  The questioner was understandably perplexed.  The stock beat expectations for EPS and revenues, and offered positive revenue guidance for the coming quarter, yet it was trading about -5% lower.  Today we see AMD trading more than -16% lower, and PLTR, yesterday\u2019s darling, is down about -12% after a +7% post-earnings bump.  This is what happens when rotation meets stratospheric valuations.<\/p>\n","protected":false},"author":4,"featured_media":145030,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":true,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[14700,6,19,8,9,26,3],"tags":[],"contributors-categories":[13576],"class_list":["post-238727","post","type-post","status-publish","format-standard","has-post-thumbnail","category-ibkr-market-insights","category-north-america","category-options","category-region","category-securities","category-text-articles","category-traders-insight","contributors-categories-interactive-brokers"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v28.2) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Stocks Priced to Perfection Require, um, Perfection<\/title>\n<meta name=\"description\" content=\"Yesterday afternoon I was asked to provide a quick comment about the initial market reaction to AMD\u2019s earnings. The questioner was understandably...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.interactivebrokers.com\/campus\/wp-json\/wp\/v2\/posts\/238727\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Stocks Priced to Perfection Require, um, Perfection | IBKR Campus US\" \/>\n<meta property=\"og:description\" content=\"Yesterday afternoon I was asked to provide a quick comment about the initial market reaction to AMD\u2019s earnings. The questioner was understandably perplexed. The stock beat expectations for EPS and revenues, and offered positive revenue guidance for the coming quarter, yet it was trading about -5% lower. Today we see AMD trading more than -16% lower, and PLTR, yesterday\u2019s darling, is down about -12% after a +7% post-earnings bump. This is what happens when rotation meets stratospheric valuations.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/ibkr-market-insights\/stocks-priced-to-perfection-require-um-perfection\/\" \/>\n<meta property=\"og:site_name\" content=\"IBKR Campus US\" \/>\n<meta property=\"article:published_time\" content=\"2026-02-04T18:12:08+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-02-05T09:00:03+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2022\/06\/yield_curve_confused_featured-img.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1000\" \/>\n\t<meta property=\"og:image:height\" content=\"563\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Steve Sosnick\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Steve Sosnick\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\n\t    \"@context\": \"https:\\\/\\\/schema.org\",\n\t    \"@graph\": [\n\t        {\n\t            \"@type\": \"NewsArticle\",\n\t            \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/traders-insight\\\/ibkr-market-insights\\\/stocks-priced-to-perfection-require-um-perfection\\\/#article\",\n\t            \"isPartOf\": {\n\t                \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/traders-insight\\\/ibkr-market-insights\\\/stocks-priced-to-perfection-require-um-perfection\\\/\"\n\t            },\n\t            \"author\": {\n\t                \"name\": \"Steve Sosnick\",\n\t                \"@id\": 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The questioner was understandably...","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.interactivebrokers.com\/campus\/wp-json\/wp\/v2\/posts\/238727\/","og_locale":"en_US","og_type":"article","og_title":"Stocks Priced to Perfection Require, um, Perfection | IBKR Campus US","og_description":"Yesterday afternoon I was asked to provide a quick comment about the initial market reaction to AMD\u2019s earnings. The questioner was understandably perplexed. The stock beat expectations for EPS and revenues, and offered positive revenue guidance for the coming quarter, yet it was trading about -5% lower. Today we see AMD trading more than -16% lower, and PLTR, yesterday\u2019s darling, is down about -12% after a +7% post-earnings bump. 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