The tech sector has boomed over the past two decades and is now the driving force of the economy. People spend more and more of their time online, and with AI starting to take over, it’s not that big of a surprise.
What is a surprise is that certain companies have surpassed even dot-com-level valuations during the recent mania. Bears have been proven wrong time and time again with these stocks, but these stocks are so detached from fundamentals that it is a wise idea to consider taking profits.
These tech stocks can still go up more in the coming months, but once the pendulum inevitably swings the other way, holding on to all your gains or getting in late can exposure you to a lot of downside risk. In comparison, the upside potential of these stocks has been getting less and less attractive.
Here are three such tech stocks to sell:
Exodus Movement (EXOD)
Exodus Movement (NYSEAMERICAN:EXOD) is a cryptocurrency wallet platform. It is self-custodial and supports 369 cryptocurrencies, so it is very popular in the crypto community. It also allows people to exchange these cryptos right on the platform. The stock is up 753% in the past year.
Revenue grew 68% year-over-year to $20.1 million in Q3 2024 and was driven by the exchange aggregation, though the segment is tied to swings in the crypto market. Bitcoin (BTC-USD) pausing its rally could cause the growth come to a stall, and if Bitcoin corrects, revenue will likely decline accordingly. It holds $120.8 million in Bitcoin and Ethereum (ETH-USD) which ties the balance sheet to crypto even more.
Moreover, operating expenses outpaced revenue growth at 78% year-over-year to $8.8 million in Q3 2024. General/admin costs rose 84%, but Exodus still managed to post profits with a 4.2% net margin.
The problem is when you look at the valuations here. Exodus Movement has a market capitalization of $1.38 billion. That’s about 136 times forward earnings and 12 times forward sales. Both the top and bottom lines are unpredictable, so I don’t think it is worth chasing this stock now.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) has seen an explosive rally after Trump was elected. The stock was already pretty expensive before that, but the post-Trump rally has taken it to unsustainable valuations, something that is already starting to reverse. TSLA stock is down 27% from its December 2024 peak but remains overvalued.
Financially, things are not that good either. Q4 2024 revenue of $25.7 billion grew just 2.15% year-over-year. Analysts expected $27.3 billion in revenue. Tesla also posted its first-ever decline in deliveries, with a 1% drop to 1.79 million vehicles. That’s on top of a net income decline of 71% year-over-year to $2.3 billion in Q4, as adjusted EPS missed expectations by $0.03. And despite earlier promises, Tesla declined to confirm its 2025 vehicle growth target.
Any other company facing such a tough time would not be trading at 119 times forward earnings. Now, people do believe that Tesla’s Optimus robots are why the market is bullish about the long term, but that’s probably well over a decade away. Tesla’s Optimus robots were remote-controlled at its latest event, and until Tesla can figure out FSD, it’s unlikely it will figure out actual robots that can do everyday tasks.
Palantir (PLTR)
Palantir (NASDAQ:PLTR) has been going parabolic over the past year and is up 365.7% and has a valuation of $265.6 billion as of writing.
The uptrend has accelerated even more after its Q4 2024 earnings where it posted a 36% year-over-year top-line increase. U.S. commercial revenue surged by 64% year-over-year, and U.S. government revenue grew by 45%. The company expects U.S. commercial sales to grow at least 54% in 2025. Palantir projects sales of approximately $3.75 billion for 2025, with an adjusted operating income of about $1.56 billion. In 2024, adjusted operating profits nearly doubled to $1.13 billion.
The numbers here are great, but do these numbers deserve the massive valuation? The valuation here is the highest you’ll find among any big company. It trades at 68 times forward sales and 211 times forward earnings. Even bulls will admit to PLTR being overvalued but are only bullish due to them believing the mania could take it higher. Palantir would have to beat all expectations and grow at an impossible pace over the next few years to maintain the valuation it has, so I’d tread very cautiously with the stock.
— Omor Ibne Ehsan
Fed's Stealthy Move Could Crash U.S. Market [sponsor]A new, secretive move being carried out by the Fed that has nothing to do with lowering or raising interest rates... could soon have an enormous impact on your wealth. According to Dan Ferris, the banking expert who once predicted the collapse of Lehman Brothers, "Millions are about to be blindsided." More here.
Source: Money Morning