During the Covid-19 pandemic, consumer technology cloud stocks received a huge boost as people around the world stayed at home. Office workers had to purchase an array of electronics and softwares in order to manage their remote workforce. But, the state of tech stocks has dramatically changed since, and some should be considered a “sell” by investors.
In 2022, U.S. equities, especially technology equities, could only be described as volatile and underperforming. Although technology stocks have largely bounced back in 2023 (The Nasdaq is up nearly 28% on a year-to-date basis), not all technology stocks are created equal.
Below is a list of 3 terrible technology stocks that you should sell this month.
Once America’s most valuable semiconductor company, Intel (NASDAQ:INTC) has steadily fallen from grace. Like many technology companies during the pandemic, Intel performed well financially. It recorded a sizable profit surge with fully diluted EPS at $4.94 and $4.86 in 2020 and 2021, respectively, both numbers well above historical figures. However, even back then, the semiconductor behemoth was plagued with both competitive and product issues. Intel has been manufacturing its own chips since its inception. In the past few years, it has been falling behind in the semiconductor manufacturing process, leading to several delays in its advanced chips. While Intel was struggling to manufacture semiconductor chips with 7 nanometers transistors, the Taiwan Semiconductor Manufacturing Company (NYSE:TSM) was already ahead of them. This led to competitors like Advanced Micro Devices (NASDAQ:AMD) grabbing market share because it was producing more efficient chips
In a recent turn around, the company has planned continued investment in U.S.-based chip factories to not just manufacture Intel’s own chips but also those of other companies as well. Unfortunately, even those plans have been bogged down by manufacturing issues.
Intel would need to outpace the more advanced manufacturing processes of both TSMC and Korea’s Samsung (OTCPK:) to reclaim its crown, and this is a tough bet. While Intel’s Q1 results beat expectations, investors still maintain that it is a tech stock to sell.
After pandemic restrictions were lifted in early 2021 and people started traveling again, Agilysys (NASDAQ:AGYS) should have been an easy bet for enterprise software investors. As a point-of-sales and property management software company geared toward the hospitality end-market, this growth felt inevitable. In 2022, AGYS beat most of its peers when markets were generally underperforming, with shares returning 78%. When the company’s fourth quarter results for 2023 came out on May 16, Agilysys beat analysts’ top-line and EPS expectations. However, Agilysys also announced it would be investing across all of its core businesses to drive future revenue growth, and equity investors were less than pleased. The stock dived 12% the following day.
The problem was, even with a profitable business model, seemingly effective product execution and an attractive end-market, the company had been trading at a premium. In particular, AGYS’s forward-looking price-to-earnings (P/E) ratio was trading around 87.4x before the company’s earnings report was released. Agilysys is still currently hovering at that valuation.
Ultimately, this is on the list of tech stocks to sell as it is currently overvalued. AGYS is down more than 6% for the year, well below many other enterprise software companies. If investors are looking for better returns, there are a plethora of other choices in the market now.
Logitech (NASDAQ:LOGI) is well-known for its array of sleek mouses and keyboards. However, like many hardware companies, LOGI received a considerable revenue and net income boost during the Covid-19 pandemic. When the company reported its full year earnings in March 2021, its revenues had increased by more than 76% and its bottom line had nearly doubled. Unfortunately, since then, Logitech’s top-line growth has steadily declined. In March 2022 and 2023, respectively, LOGI reported revenue growth of 4.36% and a revenue contraction 17.19%.
There are several reasons for this. Logitech had received that sales boost in 2020 primarily due to consumers utilizing additional technology due to working from home. This would look great in the short-term but would never hold up in the long-term. Hardware products such as keyboards and mouses do not need to be replaced as frequently as smartphones or laptops, resulting in LOGI having a cyclical business. Another reality putting pressure on LOGI’s financial performance is the current macroeconomic environment. Global economic conditions have worsened, denting consumer demand for consumer electronics.
All in all, the deteriorating macroeconomic outlook and high competition in Logitech’s market should make investors pause or sell. Currently, the stock has returned only 0.67% year-to-date, making it one of the tech stocks to sell.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.