‘Stay at home stocks’ continue to surge—this one now has a P/E ratio of over 1,000

The times may be uncertain, but one thing isn’t: Investors are paying up for some of the most popular stocks right now.

Some stay-at-home stocks have seen tremendous run-ups in price in recent months as the coronavirus has changed consumer behavior drastically during shelter-in-place orders across the country that are only now starting to lift.

The beneficiaries of stay-at-home trends include the likes of Amazon, which has been hitting all-time highs in recent weeks and now has a P/E of around 116 times trailing earnings. Netflix has also posted all-time highs in recent weeks, with the stock now trading at around 87 times trailing earnings. Semiconductor titan Advanced Micro Devices (or AMD) is trading on the higher end as well, at around 129 times trailing earnings, and payments app Square also isn’t coming cheap, trading at about 123 times trailing earnings. Others like online marketplace Etsy have also seen a run-up, with the stock (up over 130% since March) now trading at a hefty 126 times trailing earnings.

But perhaps the wildest valuation case is Zoom Video Communications. The videoconferencing company many homebound employees are now very familiar with has seen its stock shoot up over 150% year to date. With that meteoric rise, Zoom’s P/E is now off the charts—literally. S&P Global assigns the stock’s P/E a “NM” or “not meaningful” rating, as its price has split so far from its underlying earnings. Fortune manually calculated its P/E—dividing the stock’s current price by its earnings per share—and got a stunning figure of more than 1,000 times trailing earnings.

Those elevated valuations come against the backdrop of a market that has rebounded significantly since late March. In fact, according to a recent LPL Financial research note, the market as a whole is trading at around 20 times the next 12 months’ earnings, making multiples for the S&P 500 overvalued based on historical averages (and the “highest level since the tech bubble in the late 1990s,” the firm said).

Says Jeff Buchbinder, equity strategist for LPL Financial, “We’re pleasantly surprised at how quickly the market has looked forward to the recovery in 2021 and 2022,” he tells Fortune. “But no doubt on near-term earnings, stocks are expensive.”

Some strategists like Buchbinder suggest capital markets are wanting to give companies benefiting from the shutdowns the capital to take advantage of their market opportunity now. “Whether you’re talking about videoconferencing or finding a cure, there’s a lot of winners in this environment for sure, and the market is clearly recognizing that,” he says.

“When economic growth is challenged and some stocks stand out in terms of the growth they’re delivering, it makes sense they would demand premium valuations,” adds Buchbinder. Based on growth he’s seeing looking ahead, some of the bigger FAANG stocks “are going to grow into their earnings, and they’ll look cheaper in a couple of years,” Buchbinder suggests.

On a forward (or next 12 months) basis, many companies like Netflix, Amazon, and Etsy are estimated to have price-to-earnings ratios that are more reasonable. But as earnings en masse are expected to falter this year, analysts note markets generally are overlooking 2020 earnings altogether. Instead, they’re looking to how companies might recoup losses with earnings in 2021 or 2022 to justify those hefty price tags now. “Looking at earnings two, three years out, then I think you can start to assess whether a P/E ratio is reasonable,” notes Buchbinder. In fact, that’s how LPL Financial is valuing stocks based on their earnings, “given how depressed they are,” the firm said in a note Tuesday. For companies like Amazon or Netflix, estimated forward P/Es in fiscal year 2021 look more down-to-earth: Netflix’s forward P/E is estimated at around 50 times earnings, while Amazon’s is around 68 times earnings, according to S&P Global data. (Zoom’s, meanwhile, would still be over 200 times earnings for fiscal year 2021.)

Yet with so many companies suspending earnings guidance, and continued uncertainty over what an economic recovery might look like, valuing stocks is an increasingly challenging task, and some aren’t convinced that these high-fliers’ earnings can snap back so fast.

“We think it’s going to be a two-year shock to earnings, and that’s the big adjustment…that still needs to come through,” Ian Harnett, cofounder and chief investment strategist at Absolute Strategy Research, recently told CNBC’s Squawk Box Europe. “The economic adjustment has not yet been made by these markets.”

More must-read finance coverage from Fortune:

—Saving lives vs. saving the economy is a false tradeoff, economists say
—Real unemployment rate soars past 24.9%—and the U.S. has now lost 33.5 million jobs
—17% of unemployed workers aren’t looking for work—and that’s warping the official unemployment rate
—Does Apple’s stock buyback strategy make sense in this market?
—Goldman Sachs doubts there will be a Round 3 of PPP loans for small businesses
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: Why the banks were ready for the financial impact of coronavirus

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