Tech stocks in the United States sustained a jaw-breaking rally in 2023, with the Nasdaq beating all other indices, accruing a more than 43% return. While stocks largely did not begin 2024 with a great start, the major indices have risen in the past few weeks. The Nasdaq has risen 6.2%, while the S&P 500 has risen 4.9%. With equities on the rise, there may be too many stocks sporting lofty evaluations.
The three tech stocks to sell below are either overvalued, have significant growth risks, or both.
Tech Stocks to Sell: Qualcomm (QCOM)
As I have written before, Qualcomm’s (NASDAQ:QCOM) long-term share potential is definitely in jeopardy. There’s a growing competitive threat in China. In September of last year, Huawei—China’s telecom, cloud, and consumer electronics champion—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. Huawei phones are still apparently siphoning sales away from Apple.
Moreover, Qualcomm also sells chips that go into modern vehicles. Due to higher interest rates and the slowing EV market, this segment will likely have limited short-term growth potential. Although QCOM’s shares are trading upward these days, investors shouldn’t get excited.
Apple (AAPL)
Apple (NASDAQ:AAPL) has been struggling to spur revenue growth in recent years. The company’s fourth-quarter report for the fiscal year 2023 saw revenue decline by 1% Y/Y. This underscores that the mobile handset market is still at capacity.
Another reason investors should be wary of AAPL stock is the uncertainty of the Chinese market, which accounted for about 18.9% of Apple’s revenue at the end of its fiscal year 2023. Huawei’s launch of the Mate 60 Pro led many Chinese consumers to favor it over the new iPhone amidst geopolitical tensions.
While Tim Cook was pleased to report that Apple’s Services revenue increased to an all-time high, unless Apple pursues a broad and competent diversification strategy, investors should not hope for strong share price appreciation.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) is undoubtedly one of the largest and most prominent players in the global electric vehicle market. The automaker has also been influential in creating the basic infrastructure for electric vehicle charging, ultimately tackling the EV market from different angles.
Throughout 2023, Tesla defied skeptics and broke records. In particular, Tesla’s quarterly earnings have come in above analysts’ estimates, and the price-cut strategy the automaker began to pursue in the beginning year has increased quarterly deliveries while also placing pressure on gross margins. Tesla’s Q4’2023 financial figures also beat Wall Street’s estimates. Unfortunately, the EV maker’s CEO Elon Musk shared grim guidance for Tesla and its shareholders, citing interest rates and weak consumer demand.
Tesla is also facing growing competition from China’s BYD, which overtook Tesla as the largest seller of EVs in China for 2023. Elon Musk is clearly concerned with the rise of Chinese EVs. The Tesla CEO even said China’s EV players would “demolish” their Western counterparts unless trade barriers were implemented.
These events and a broad slowdown in the EV market make Tesla a sell. The company is trading at 58.9x forward earnings and looks pretty stretched in this volatile market.
On the date of publication, Tyrik Torres 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.
