The future of the U.S. economy appears to be optimistic. The Federal Reserve has signaled a potential shift towards interest rate cuts in the coming year, providing relief to American households grappling with high inflation. Additionally, the Biden administration’s hope for a “soft landing,” characterized by decreasing inflation without a significant increase in unemployment or a recession, seems validated by the Fed’s more dovish posture.
The prospect of lower interest rates is anticipated to benefit various sectors, specifically investments. In fact, this shift could potentially influence economic perceptions in the lead-up to the 2024 presidential election.
If our economy is projecting to avoid a recession and the market is expecting to perform well, now is the time to get out of risky and overvalued positions. If you’re itching to consider safer investments instead, begin by selling these stocks now to maximize profits and minimize risk.
DoorDash (DASH)
DoorDash (NASDAQ:DASH) is a food delivery service that works with local restaurants to deliver food to people’s homes and businesses. Despite facing challenges, the company has achieved substantial revenue, totaling $8.15 billion in the trailing twelve months with a gross profit of $3.08 billion.
Impressively, in 2023, DASH demonstrated a robust 112.39% year-to-date stock price, indicating a strong market presence and demand for its services. But, we need to look into the details: DASH’s P/E non-GAAP (FWD) sits at 57.56, which is 270% above the competition. Regretfully, this signals that DASH has massive overvaluation.
DoorDash faces potential challenges in its long-term sustainability as a company. While demand for its services has surged, the risk of a prolonged shortage of drivers or labor-related issues looms large. The low net pay for “Dashers,” exacerbated by rising vehicle costs and maintenance expenses, may lead to a high turnover of drivers. This is particularly likely if economic dynamics shift or if alternative employment options become more appealing. The hypothetical result poses a significant threat to the company’s workforce stability and overall success.
This overvaluation and weakening workforce mean that its business model is unsustainable, riding on Covid-19 highs.
Palo Alto Networks (PANW)
Palo Alto Networks (NASDAQ:PANW) has enjoyed significant success this year, with a remarkable 122.16% year-to-date increase. As of writing this article, the company anticipates an additional 18.76% growth in 2024.
To be fair, this isn’t an unprecedented goal. In 2023, its revenue experienced a robust growth of 25.3%, reaching $6.89 billion. Notably, Palo Alto Networks achieved a $439 million profit in FY 2023, a notable turnaround from the $267 million loss in FY 2022. Undoubtedly, it has been a standout performer in the tech sector throughout the year justifying its robust performance.
However, the impressive market performance has led to a substantial overvaluation. Right now, the company’s stock sits with a P/E GAAP (TTM) of 172.82%, surpassing competitors by 523.9%. This P/E should raise some alarms, concerns arise due to a slowdown in the company’s growth. The surge in orders during the past couple of years is now tapering off as competitors get more aggressive. Moreover, Palo Alto Networks itself acknowledges an expected downtrend of sales. Particularly worrisome is the projected shrinkage of billings, a key metric representing new orders and a reliable predictor of future revenue.
Now is the time to get rid of your PANW holdings, before we see the valuation take any hits and while you can maximize profits.
Opendoor Technologies (OPEN)
Opendoor Technologies (NASDAQ:OPEN) is a leader in the digital real estate space that aims to help customers get real-time quotes for buying and selling homes. Currently valued at $4.56, OPEN has had an impressive year with exactly 200% year-over-year growth. However, profits may be slow while stock growth is at its apex.
From an industry standpoint, OPEN is placed in the profitable, well-established real estate sector. In 2021, real estate brought in $3.69 trillion, with projections for that number to grow up to $5.85 trillion by 2030 with a 5.2% CAGR.
Financially, OPEN reported a mediocre Q3 2023 with metrics down in revenue and net change in cash. Specifically, the company brought in revenue of $980 million, marking a significant 70.84% decrease year-over-year, as well as another large loss compared to $1.9 trillion brought in the previous quarter (Q2 2023). Further, revenue failed to meet consensus by 3.39%. Net income was reported at -$106 million per quarter, with net change also being reported at -$426 million, though they were year-over-year increases.
Overall, these poor financials suggest that OPEN will have a down year in terms of expansion. They have no net change in cash along with a significant loss through net income. For a predominantly virtual company, large debts and loss in income have OPEN projected for marginal output this year, compared to the large successes seen in prior years. Don’t risk the current profit at stake with OPEN, and sell the stock while the valuation is high.
On the date of publication, Michael Que 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.
The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
