An unfortunate aspect of the stock market is that certain companies can rapidly gain value as a result of bullish echo chambers. This can lead to a level of hype that sometimes obscures the real value or financial situation of a company. Thus, the result is some overvalued stocks to sell. While there are both objective and subjective ways to value a company, its share price can often come down to something as simple as investor interest or faith.
However, investors interested in long-term returns need to avoid stocks that gain their value from conversations. Rather, investors should focus carefully on balance sheets, earnings reports and the metrics derived from them like price-to-earnings (P/E) ratios, EBITDA and cash flow. After all, the numbers may tell a different story than the news.
And, while that story may not be 100% the opposite of mainstream attention, it might give clues about timing of a price correction.
Apple (AAPL)
Placing Apple (NASDAQ:AAPL) among overvalued stocks to sell might sound harsh.
However, this is a case for investors who want to avoid a potential crash in value. True, Apple is a sweetheart of the modern investing world and one of the Magnificent Seven. Yet, it starts to look small in comparison to the gains of companies like Microsoft (NASDAQ:MSFT) and Nvidia (NASDAQ:NVDA). Also, AAPL could suffer due to artificial intelligence (AI) hype.
However, it’s exactly this kind of energy that Apple is using to draw attention to its stock with its long-awaited announcement of OpenAI’s ChatGPT coming to Siri and its new Apple Intelligence platform. The company’s share price soared around 7% last week on the news. But it remains questionable whether this software integration will make up for lackluster sales growth. In the meantime, leaks of the iPhone 16’s relative similarity to the previous two generations have done little to generate more hype. This clues in a possible decrease in share value before its release.
Super Micro Computer (SMCI)
Despite fervent attention and 200% growth in the last year, Super Micro Computer (NASDAQ:SMCI) might need a closer look. Putting aside its past sales to Iran and Chinese spyware, the company is well into its most recent price correction. And it likely has a ways to go before finding its new floor.
For starters, the company’s P/E ratio currently sits at around 47.39x at a price of nearly $840. That’s not cheap in the slightest for a company with a relatively narrow approach to the information technology sector. As a specialized provider of data center technology, SMCI is at the mercy of the rest of the industry continuing to go all in on AI. Should both institutional and retail investors begin to sour on the industry’s prospects, SMCI could continue to dip in price.
Therefore, investors should sell SMCI while its price is still high before buying back into a correct position.
Reddit (RDDT)
Reddit (NYSE:RDDT) is a newfound member of the New York Stock Exchange as of March 2024. It has a lot to show off since it nearly doubled its valuation since its IPO three months ago. Despite this, the news has focused on Reddit’s deal with OpenAI to allow the company to use Reddit’s vast sea of conversational and informational data for AI training purposes.
Whether or not this approach yields positive results remains uncertain. Yet, it does underscore a factor about Reddit that acts like a double-edged sword. On one hand, people in search of answers rely on search engine results. They may stumble across an old post that helps them. On the other, its niche application and roots in American millennials make it hard to adopt into other countries and cultures.
While the stock may be fresh and exciting, it’s certainly difficult to grasp the reason a website platform for public forums and moderated discussion could grow its share value so rapidly. Thus, RDDT stock could be among overvalued stocks to sell.
On the date of publication, Viktor Zarev 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.
