Stocks may already be off to a rough start this month, but it’s not too late to consider getting out of the tech stocks to sell in April. The reasons for this are twofold. First, the market could continue to change direction.
Now that there’s greater uncertainty about when the Federal Reserve will begin lowering interest rates, volatility may continue for the stocks most sensitive to interest rates, which includes high-growth tech stocks.
Second, beyond macro factors, with many top names in tech, there are company-specific concerns that should warrant a fast exit. Some of these problem-plagued tech names have already started to decline due to such issues. However, even in these situations, it is far too early to say that the dust has settled.
With this in mind, let’s take a look at the following seven tech stocks to sell in April. Interestingly enough, two of them are “Magnificent Seven” components.
Apple (AAPL)
Most of the “Mag 7” stocks have been in the green thus far in 2024, but not Apple (NASDAQ:AAPL). Shares in the iPhone maker have experienced a moderate move lower since the start of the year. Weak demand for the company’s iconic product, especially in China, has weighed heavily on shares.
In addition, there’s an antitrust suit filed against Apple by the U.S. Department of Justice, and 15 U.S. state attorney generals. Following the recent AAPL stock slump, some may be saying that this tech giant has become a buy on the dip. Largely, due to the possible emergence of a generative AI catalyst for shares.
Still, the above-mentioned headwinds will continue to persist in the near-term. Apple is expected to next report earnings sometime in early May. With some analysts anticipating disappointment with Apple’s upcoming fiscal results, AAPL may be on the verge of another pullback.
IBM (IBM)
Thanks to “AI mania,” IBM (NYSE:IBM) shares have finally broken from a more than decade-long slump. Yet while those early to the gen AI trade in “Big Blue” have profited, not only is it too late to pounce on this opportunity.
The AI catalyst may now be excessively priced into IBM stock. As I argued last month, investors are perhaps overestimating how much gen AI-related growth will boost the tech giant’s overall operating performance. Sure, this may be merely a case of splitting hairs, if “AI mania” is set to continue.
But if “AI mania” is fading, and a changing market drives a sell-off for AI stocks, IBM could reverse course. Irrespective of an “AI bust,” if IBM’s growth fails to re-accelerate in the coming quarters, a sell-off could still occur. With major downside risk in mind, consider IBM one of the tech stocks to sell in April.
Intel (INTC)
Just like IBM, Intel (NASDAQ:INTC) is another “old school” tech name that has experienced a big rally thanks to all the excitement surrounding the rise of gen AI. Over the past six months, the chip maker’s shares have rallied by nearly 24%.
That said, some negative factors have started to weigh on INTC stock. This includes a recent China chip crackdown, but a larger concern has to do with Intel’s foundry business. Intel’s plans to become a major foundry, or third-party manufacturer of semiconductors for “fabless” chip designers, have been a key component of its overall turnaround plans.
However, with this unit reporting big losses, and not expected to hit breakeven until 2027, the Intel turnaround appears to be taking longer-than-expected. With shares trading as if a turnaround has already happened, at 32.1 times forward earnings, INTC may be in for a de-rating, as investors reset expectations.
Shopify (SHOP)
Slowing growth and a rich valuation is what makes Shopify (NYSE:SHOP) one of the tech stocks to sell in April. Since the pandemic, this e-commerce software company has scaled up significantly. Reporting around $1.6 billion in revenue during 2019, last year Shopify’s top line came in at over $7 billion.
However, after this significant scale-up, which has also resulted in a move to consistent profitability, things are slowing down for Shopify. Revenue increased by around 26% last year, but top-line growth is expected to decelerate to around 20% this year and next year.
Earnings growth is also decelerating. This calls into question the super-high valuation of SHOP stock. Shares today trade for a staggering 76.2 times forward earnings. Potentially at risk of being “priced for perfection,” following Shopify’s upcoming earnings release on May 2, the stock could experience a heavy post-earnings sell-off.
Snowflake (SNOW)
Snowflake (NYSE:SNOW) is another situation where the market put the cart before the horse, with regard to potential AI-related tailwinds for this cloud data company. As you may recall, SNOW experienced a big run-up in price between November and February.
However, the direction of SNOW stock changed dramatically starting on Feb 28. As I recently discussed, that’s when investors bailed on Snowflake, following the company’s latest quarterly earnings release, which coincided with the surprising news of Snowflake CEO Frank Slootman’s resignation.
Yet even after SNOW’s more than 32% drop since this spate of disheartening news, more downside may lie ahead. Shares trade for 163.6 times forward earnings. AI optimism may enable shares to sustain this valuation today, but as Monness, Crespi, Hardt & Co. analyst Brian White recently argued, skepticism about the AI catalyst could increase. In turn, this could lead to significant multiple compression for shares.
Atlassian (TEAM)
Atlassian (NASDAQ:TEAM) is a purveyor of project management software. Its products include Jira, Confluence, and Trello. Again, like many other enterprise software stocks, TEAM late last year and early this year received a major boost thanks to the AI trend.
Just like similar plays, this boost has long since peaked. TEAM stock has slid 17.6% lower since the start of the year. Admittedly, it may be an overstatement to say that this represents a major sell-off. However, another round of big price declines may be just around the corner. Why?
Post-market on April 25, Atlassian will release its latest quarterly results and guidance. Even if the company delivers an earnings beat, updates to guidance could fall short, much like what happened last quarter. To avoid getting caught holding the bag in the event of a post-earnings sell-off, consider TEAM one of the tech stocks to sell in April.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) continues to take a big tumble. The latest move lower for the EV maker’s has been driven by disappointing quarterly deliveries data. Reported deliveries of 386,810 vehicles came in below already walked-back expectations.
Softening demand and falling margins have been at the root of the TSLA stock sell-off. These major negatives are likely to continue in the near-term. Clearly not immune to the cyclicality of the auto business, there’s now even more reason to question why TSLA’s massive valuation premium to other automotive stocks.
Previously, I’ve argued that an opportunity may emerge to snap up this Mag 7 component at a “can’t miss” price. However, at around $165 per share, TSLA has a ways to go before reaching the buy zone, which is around $100 per share. In the meantime, exit any existing Tesla stock positions, and wait for this ideal entry point.
On the date of publication, Thomas Niel 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.
