Tech stocks have had a stellar 2023. And with technologies such as AI taking off, traders have been rushing into more speculative investments in hopes of catching the next big thing.
However, some tech stocks have run dramatically ahead of their fundamentals. It’s time to sell these three tech stocks and lock in their big year-to-date gains before they disappear.
Doordash (DASH)
Doordash (NASDAQ:DASH) operates a logistics platform focused on the delivery of food and other products to people’s homes. The pandemic served as a big driver of delivery platform adoption as people preferred delivery to in-restaurant dining options.
Doordash has grown to be a large business, with revenues for this year projected at about $8.6 billion. And the company is profitable, which puts it ahead of several of its competitors. However, with DASH stock up more than 100% year-to-date, it has run up to 57 times forward earnings.
And Doordash may face a more challenging 2024. A slowing economy is likely to make consumers more reluctant to order delivery. And costs are coming under pressure. Doordash and other delivery companies will soon have to pay at least $17.96 per hour to employees in New York, and other cities are likely to follow suit.
Palo Alto Networks (PANW)
Palo Alto Networks (NASDAQ:PANW) is a cybersecurity solutions firm. It offers traditional features such as firewalls along with specialized services such as threat detection, DNS security, URL filtering, data loss prevention and so on.
2023 was a busy year on the cybersecurity front. Hackers hit casinos, electoral commissions, telephone companies, logistics facilities, and even the U.S. State Department among other high-profile targets. Not surprisingly, investors have bid up cybersecurity stocks such as Palo Alto Networks in response to this trend.
Unfortunately, shares have gotten way ahead of themselves. PANW stock is up almost 90% year-to-date. This has pushed the stock up to more than 55 times forward earnings. That’s a high price for a company growing revenues at just 19% annually.
Samsara (IOT)
Samsara (NYSE:IOT) operates a cloud-based platform for managing employees, equipment, and workflows.
The company’s ticker symbol, IOT, stands for internet of things. Samsara’s insight is that with the spread of mobile data and connected smart devices, it allows companies to track their resources more closely. Now, for example, a company’s truck fleet can automatically send data to Samsara’s cloud and allow management to optimize its operations.
This all sounds great in practice. However, trader enthusiasm has run far ahead of results. IOT stock is up more than 175% year-to-date and has seen its market cap balloon to $18 billion.
That seems quite expensive for a firm that analysts forecast will generate just $919 million in revenues this fiscal year and which is only marginally profitable. IOT stock has run up on hopes that AI integration in its platform will accelerate revenue growth. That may well happen, but that potential upside is already baked into the stock price at today’s lofty valuation.
On the date of publication, Ian Bezek 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.
