After a roaring first half of 2023, traders have started looking at tech stocks to sell. There are various reasons for the recent dip in the tech sector. In fact, one of the most pressing issues appears to be rising interest rates. As the Federal Reserve’s campaign against inflation continues, long-term bond yields have hit new highs. This has traders fearing a potential recession and cutting exposure to more growth-focused investments. Earnings are another point of concern. Certain pockets of the tech industry have shown profound weakness in 2023. While things haven’t been that bad, there hasn’t been the sort of positive earnings stories normally associated with a surge in stock prices. These factors add to the already considerable issues facing these seven tech stocks to sell now.
Tech Stocks to Sell: Apple (AAPL)
As Apple (NASDAQ:AAPL) goes, so goes the market. With a market capitalization of greater than $2.7 trillion and as the world’s most valuable company, Apple is the leading barometer of the overall market’s health. As such, it’s not surprising that the market turned lower following Apple’s most recent earnings report. In it, Apple reported a 1% decline in year-over-year revenues. That’s especially underwhelming given the high inflation rate and general atmosphere of price increases in much of the economy.
At the heart of the matter is the fact that Apple has simply saturated its market. Everyone that wants a high-end smartphone already knows Apple and likely buys the company’s phones. At this point, it’s hard to see how Apple can grow unless it launches some new and disruptive product. There’s nothing wrong with being a slow-moving cash cow. There is, however, a problem, with investors paying nearly 30 times forward earnings for this slowly shrinking business. A 30x price-to-earnings (P/E) ratio almost always works only if the underlying business has rapid growth. Apple does not.
With the market now moving lower, AAPL stock’s recent dip is likely to accelerate. There’s simply little reason for Apple to sell at such a high valuation given its earnings outlook.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) has been one of the top-performing tech stocks of 2023. But, at this point, shares appear to have gotten ahead of themselves. To that point, on Monday, NVDA stock surged following a favorable analyst note. HSBC’s Frank Lee raised his price target from $600 to $780. Lee sees Nvidia’s earnings coming in ahead of expectations. However, that view increasingly appears to be consensus, as several other analysts have raised their outlooks recently.
This sets the stage for a potential buy the rumor, sell the news event with earnings later this week. After all, if almost everyone is bullish, who is left to buy the stock even if the company does beat earnings? And if Nvidia misses the mark, look out below. NVDA stock is up more than 200% year-to-date and sells at a lofty P/E ratio, leaving little margin for error going forward.
Tech Stocks to Sell: Advanced Micro Devices (AMD)
Semiconductor stocks have become exceptionally popular this year. All thanks to the rise of artificial intelligence. It’s true that some chip vendors will benefit dramatically from this trend. But it’s far from certain that the whole industry will. And AI is a long-term story in any case. In the here and now, things are looking rather grim for many chip firms, including Advanced Micro Devices (NASDAQ:AMD). Analysts are skeptical of AMD’s AI ramp-up timeline, and in the meantime, its operating results are grim.
With the computing and graphics card markets dramatically slowing after the 2021 boom, AMD’s profits have disappeared. In fact, the company ran an operating loss of $20 million last quarter. Meanwhile, revenues plunged by 18%. It’s not just consumers driving the weak results; the formerly booming data center market has also tanked, with AMD’s data center revenues falling 11% this quarter.
Long story short, AMD stock is still selling for more than $100/share today. It sold for about $50/share prior to the pandemic. With the stay- and work-from-home-related boom long over and the data center market now losing steam as well, it’s unclear why currently unprofitable AMD would maintain such a lofty valuation.
Palantir Technologies (PLTR)
Traders might be tempted to buy the dip on Palantir Technologies (NYSE:PLTR). After all, PLTR stock has pulled back about 25% from its recent highs. However, shares are still aggressively priced at more than 62x forward earnings today. That’s an awfully steep valuation for what is, according to some skeptics, simply an “overhyped data consultant” shop.
It’s easy to spin a bullish narrative for PLTR stock around artificial intelligence and big data analysis. However, it’s unclear if Palantir is really all that more advanced than its rivals. The company’s fairly pedestrian 16% projected 2023 revenue growth rate suggests that at least some of the AI excitement around PLTR stock may be overblown.
It’s also worth considering that Palantir stock was selling for $8 per share as recently as May. Even after the recent dip, shares are still at an elevated price compared to their 2023 trading range. Given Palantir’s limited profitability and slowing revenue growth, I expect significantly more downside in the coming weeks and months.
Tech Stocks to Sell: SentinelOne (S)
One way to get an edge in tech stock investing is to watch a firm’s partners. In this case, traders should consider selling SentinelOne (NYSE:S) after a disappointing earnings report from security software peer Fortinet (NASDAQ:FTNT). FTNT stock plunged more than 20% after revealing that sales growth had slowed amid a worsening industry outlook.
This has a direct readthrough to SentinelOne, as it offers an integrated security solution in partnership with Fortinet. SentinelOne also saw its shares plunge 30% back in June on a weak earnings report of its own. The truth is that budgets are looking tighter in the security software space, and that’s leading to falling growth rates across the board.
That’s especially ominous for SentinelOne as it’s a smaller firm that has yet to reach profitability. Indeed, analysts see SentinelOne continuing to lose money through at least the end of fiscal year 2025. That puts S stock in a vulnerable place amid a slowing sector and growing macroeconomic headwinds.
SentinelOne shares popped Monday on reports that the company is up for sale. However, a Reuters report cautioned that initial expressions of interest failed to meet the company’s expectations. This seems like pretty thin gruel for such a pop-in S stock, and the fact that the company is reportedly up for sale could indicate that another disappointing earnings result is forthcoming.
Microstrategy (MSTR)
Microstrategy (NASDAQ:MSTR) is a software company offering enterprise analytics. Though revenues have been stagnant in recent years, efforts to rejuvenate the business involving a subscription business model and incorporation of AI into the business may help turn things around.
However, most investors care about MSTR stock because the company’s CEO bet the firm’s balance sheet on Bitcoin (BTC-USD). As of July 31, the company held 152,800 Bitcoins acquired for a total cost of $4.53 billion or $29,672 per Bitcoin.
There are two issues with this. One, Microstrategy didn’t have cash on hand for all $4.5 billion of Bitcoin, and thus went heavily into debt to make these purchases. That could cause issues if the firm’s collateral declined in value. Speaking of which, the price of bitcoin recently plunged to $26,000 amid rising macroeconomic and regulatory uncertainty. This means that Microstrategy is now underwater on its historic Bitcoin purchases. And its balance sheet will face increasing pressures if the Bitcoin decline accelerates. Despite the recent setbacks, MSTR stock is still up more than 100% year-to-date. That’s way too generous given the growing challenges facing the company.
EVgo (EVGO)
EVgo (NASDAQ:EVGO) operates a fast-charging network for electrical vehicles. It operates more than 2,500 fast chargers and a few hundred slower charging units. There should eventually be a good business in the fast-charging space. However, it’s far from clear that EVgo will be the ultimate winner. There are much larger and more well-funded competitors such as ChargePoint Holdings (NYSE:CHPT). And incumbents such as Tesla (NASDAQ:TSLA) and other auto companies, along with gas station and convenience store operators can easily compete as well.
This leaves EVgo in a tricky situation. It came public via a smaller SPAC and has already seen much of the initial enthusiasm diminish. Its balance sheet isn’t in great shape either. EVgo has around $200 million of net cash to work with. But it spent $228 million on capital expenditures over the past year to install charging stations, and the operating business loses a significant chunk of money as well. This suggests that EVgo will have to slow its expansion and/or raise more capital to keep the business plan going into 2024. That should put more pressure on the already floundering price of EVGO stock.
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.
