The tech sector has offered many opportunities to multiply money. Artificial intelligence (AI), e-commerce and online advertising are some of the tech avenues that have propelled corporations and indices to all-time highs.

However, every sector is filled with bad apples that can hurt shareholders and leave them trailing the S&P 500. Some tech stocks look promising and enjoy significant rallies only to fizzle out once revenue growth slows down.

Many high-flying tech companies risk this fate. While these firms look unstoppable as revenue soars, they often endure significant losses to generate high revenue growth. Investors think 5 to 10 years out when revenue growth is strong, but once cracks appear in the growth narrative, investors shift their focus to the substantial valuation of these companies.

Wondering which tech stocks present risks for long-term investors? These are some overvalued tech stocks to sell.

Etsy (ETSY)

Several e-commerce companies are reporting decelerating revenue growth, and the trend has spread out to other sectors. Etsy (NASDAQ:ETSY) did that back when companies were reporting strong results in 2023 and 2024. 

Sure enough, Etsy reported another quarter of declining year-over-year (YOY) growth for consolidated gross merchandise sales. This time, it was down by 2.1% YOY. While overall revenue was up by 3.0% YOY, that’s only because of higher fees and advertisements. It’s not a winning formula in the long run. Net income sank by 14% YOY, demonstrating that Etsy’s growth days are well over. 

Some investors cling to hope, believing the stock can rally again like it did during the pandemic. However, Etsy hasn’t rewarded these investors. Shares are down by 32% year-to-date and have stumbled by more than 80% from their peak. It’s only a matter of time before Etsy reports YOY revenue declines on top of YOY gross merchandise sales declines.

Zoom (ZM)

Zoom (NASDAQ:ZM) is another pandemic darling that lost its spark once the world returned to normal. Shares are down by roughly 90% from their peak and have dropped by 20% year-to-date. The company doesn’t have much of a competitive moat as other tech companies also offer video conferencing software. If its competitors continue to innovate, Zoom may lose market share and have difficulty gaining ground.

Q1 FY25 results demonstrated that Zoom isn’t gaining much traction. Revenue only increased by 3.2% YOY. Leadership rushed to mention how Zoom is incorporating AI in the Q1 FY25 press release. AI is innovative, and many companies are rushing to talk about it. This decision to focus on AI in the press release comes amid Zoom no longer wanting to be known only as a video conferencing company.

It’s hard to tell what that transformation will look like if it takes place at all. However, several tech stocks offer more captivating growth catalysts with greater margins of safety. 

DocuSign (DOCU)

DocuSign (NASDAQ:DOCU) also enjoyed a surge during the pandemic as more people signed digital documents. The stock was a top performer in 2020 and 2021 but has since dropped by more than 80% from its all-time high. The losses continue to grow based on DocuSign’s 9% year-to-date decline.

Revenue growth has decelerated considerably over the past few years. The company only reported 7% YOY revenue growth in the first quarter. Meanwhile, billings only grew by 5% YOY, indicating more of the same. EPS surged from $0.00 to $0.16 in one year, but gains in net income won’t last if revenue growth remains low.

The low growth puts DocuSign’s P/E ratio into focus, which currently hovers above 100. The business doesn’t offer meaningful long-term growth opportunities, and a high valuation suggests the stock can continue to fall. DocuSign recently authorized a $1 billion stock buyback, which isn’t the most prudent move for long-term growth. Yes, it will help the stock price in the short run as the company repurchases shares, but that money isn’t doing anything for DocuSign’s long-term prospects.

On the date of publication, Marc Guberti 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.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.