Tech equities in the United States sustained a jaw-breaking rally in 2023. The NASDAQ beat all other indices, rising more than 43% for that year. Stocks largely are not off to a great start in 2024. This is mostly due to the inflated valuations many stocks accrued toward the end of last year. However, while certain stocks may have too high of a valuation, the three tech stocks below are not only overvalued but are also facing broader problems that could impede their growth. Therefore, they are the tech stocks to sell that we are putting in the hot seat today.
Qualcomm (QCOM)
Qualcomm‘s (NASDAQ:QCOM) share price rallied, like many other stocks, towards the end of 2023. The stock ended up 35% for the full year, beating the S&P 500 but trailing the NASDAQ. While shares are trading cheaply at only 15.1 times forward earnings, I would caution investors about pouring money in this stock.
QCOM’s long-term share potential is definitely in jeopardy. Currently, it’s largest market is China, and 2023 showed us how resilient the Chinese semiconductor can be. In early September, Huawei—China’s telecom, cloud, and consumer electronics champion—quietly released the Huawei Mate 60 Pro, which features a seven-nanometer system on a chip (SoC) designed and manufactured in China. Moreover, the wireless modem on the Huawei Mate 60 Pro also reached fast 5G speeds.
For years, Qualcomm has provided both the SoC and wireless modem for Android smartphones. If China-based smartphone OEMs begin turning to made-in-China semiconductor devices, Qualcomm’s dominance in that country (and the globe) could be tarnished. In my humble opinion, investors are better of cashing in whatever gains they have received on their Qualcomm bet and move on to semiconductor stocks with better prospects. There are amazing stocks out there, so steer tech stocks to sell like this one.
Agilysys (AGYS)
Agilysys (NASDAQ:AGYS) is an enterprise software company specializing in point-of-sales and property management software geared toward the hospitality end-market. The company has been able to beat Wall Street’s estimates for the past few quarters. Most recently, in late October, second quarter results for the company’s fiscal year 2024 were released, indicating Agilysys delivered record revenue results, and stock rallied 25.3%.
Despite solid financial results, the problem still plaguing Agilysys is the company’s valuation. AGYS shares are still trading at an immense premium with a forward-looking price-to-earnings (P/E) ratio of around 66.5 times. The software company is just too expensive to justify buying at this point, and investors who are considering to invest should proceed with caution.
MicroStrategy (MSTR)
MicroStrategy (NASDAQ:MSTR) is a software company that specializes in business intelligence and analytics. In particular, MicroStrategy’s analytics tools help to improve the efficiency of users’ workflows by providing them with helpful analytics and visualizations.
However, most market-watchers have not concerned themselves so much with MicroStrategy’s business intelligence product set; rather, company’s large Bitcoin portfolio has drawn more attention.
The company’s stock has appreciated 346% YTD, and a lot of that performance mimicked Bitcoin (BTC-USD). The famed cryptocurrency had a great run last year but because of its speculative nature, investors should not hold MSTR shares for too long. Furthermore, MicroStrategy is trading at 58.2x forward earnings, which is certainly expensive and could provoke a future devaluation.
On the date of publication, Tyrik Torres did not hold (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.
