Today is not a great day for the FTSE 250 index, or a particularly bad one, for that matter. As I write, it is down by 0.7% from last week’s close, which is just not a big enough number to take note of. However, some stocks are trading very strong today in any case. One of them is the greeting cards e-retailer Moonpig (LSE: MOON). It is up some 7.2% as I write, an increase second only to Jupiter Fund Management, which is up by an even bigger 8%.
My latest article on Moonpig was published only this Saturday. And in that, I had said that I would refrain from buying the stock right now. My sense was that it was way too pricey for me. Yet, cut to Monday, and it is rallying. What is going on here? And more importantly, was I wrong in deciding not to buy it?
Why is the Moonpig stock rallying?
First, let us talk about why the FTSE 250 stock could be rallying. I reckon this is directly to the Omicron variant. From my own portfolio of FTSE 100 stocks, I can see the trend among gainers today. These include the likes of AstraZeneca, Ocado, and Rentokil Initial. All three are good defensives against a potential virus-induced market meltdown.
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For instance, AstraZeneca is the Covid-19 vaccine maker and healthcare stock, which is a good safe stock at anytime. The Ocado stock saw its most glorious times last year as we ordered groceries in during the pandemic, and Rentokil Initial, the pest controller and hygiene services provider, saw strong demand for the latter during Covid-19 as well. Similarly, Moonpig also saw a spurt in growth last year, as its bricks-and-mortar competitors were temporarily removed from the game. As virus fears rise again, it is little wonder that investors are betting on the stock again.
Robust fundamentals
Moreover, as I pointed out in my article, its performance is still pretty decent. It might have declined after the lockdown boom, but compared to 2019 it is strong. This could bode well for it in the future as well. This is especially since we are still quite hopeful of recovery next year, which is a good time for discretionary consumer spending.
But even if the latest variant sends us back in to lockdown or makes us cautious about going out, I reckon that the Moonpig stock could stand to gain like it did last year. In other words, this is one stock that could be a winner either way.
Should I have bought the FTSE 250 stock earlier?
So was I wrong in saying that I would not buy it?
The fact is, I still believe the stock is too pricey. In fact, the latest update price-to-earnings (P/E) number is 143 times. I think that is an eye-watering number, and I can think of multiple FTSE 100 stocks that could give me good returns at lower relative prices. Also, with rising inflation, I think consumers could cut back on discretionary purchases going forward. I maintain, that for now it is just too risky for me to buy the Moonpig stock.
