3 stocks in bubble trouble, about to collapse of their own hype

Bullish echo chambers can cause some companies to gain significant value quickly, which is an unfortunate feature of the stock market. This can lead to some level of excitement which occasionally reveals the true value or financial situation of the company. This means that there are some expensive stocks to sell as a result. Although the value of a company can be determined objectively or subjectively, investor confidence or interest is often a determining factor in share price.

However, long-term investors should stay away from companies that derive their value from talk. Instead, investors pay close attention to balance sheets, earnings reports, and the measures they derive from, such as cash flow, EBITDA, and price-to-earnings (P/E) ratios. After all, data can tell a different story than the headlines.

Moreover, that story may suggest the timing of a price correction, even if it is not completely contradictory to the public’s attention.

3 stocks in bubble trouble, about to collapse of their own hype

---

Apple (AAPL)

Source: Shutterstock / Republic of Moab
Adding Apple (NASDAQ:AAPL) to the list of overpriced stocks to sell may seem difficult.

Still, this is the case for investors who want to avoid potential value collapse. It’s true that Apple is one of the Magnificent Seven and the current darling of the investment world. However, when compared to the profits of businesses like Microsoft (NASDAQ:MSFT) and Nvidia (NASDAQ:NVDA), it starts to look insignificant. Moreover, the excitement surrounding artificial intelligence (AI) could hurt AAPL.

But with the much-anticipated news that OpenAI’s ChatGPT is coming to Siri and the new Apple Intelligence Platform, Apple is precisely using this kind of excitement to drive attention to its stock. Last week’s announcement sent the company’s share price up nearly 7%. However, it is still unclear whether this software integration will compensate for weak sales growth. Meanwhile, leaks that revealed similarities between the iPhone 16 and the last two generations didn’t make much of a buzz. This suggests that the share value may have fallen prior to the announcement.

Super Micro Computer (SMCI)

Source: Shutterstock.com / T. Schneider
Super Microcomputer ( NASDAQ:SMCI ) , despite intense attention and a 200% gain over the past year, may deserve more scrutiny. The business has fully implemented its most recent price adjustment, ignoring its past sales to Iran and Chinese spyware. And until a new floor is found, it probably still has a long way to go.

First, at a price of about $840, the company’s P/E ratio is now 47.39x. It is very expensive for a business that focuses on a small segment of the information technology industry. Being an expert in data center technology, SMCI is counting on the industry as a whole to continue to invest heavily in AI. If both institutional and retail investors lose confidence in the future of the industry, SMCI’s price may fall.

As a result, before repurchasing SMCI at a higher price, investors should sell the company at a higher price.

Reddit (RDDT)

Source: Shutterstock.com / oasissamuel
As of March 2024, Reddit (NYSE:RDDT) is a brand new participant on the New York Stock Exchange. In the three months since its IPO, its valuation has nearly doubled, a lot to brag about. Despite this, Reddit’s partnership with OpenAI, which allows the firm to leverage Reddit’s vast collection of conversational and informative data for AI training, has dominated the news.

It is not clear whether this policy will yield fruitful results. However, this highlights a feature of Reddit that has two sides. People who are looking for information rely on search engine results on the one hand. They may come across useful old posts by accident. However, due to its exclusive use and American millennial origins, it is difficult to integrate into other nations and cultures.

While the company may be new and interesting, it’s hard to understand how a website platform for public forums and censored conversation could increase the value of its shares so quickly. As a result, selling expensive stocks may involve RDDT.

As of the publication date, Victor Zarev has no direct or indirect holdings in any of the securities mentioned in this article. The author’s opinions are expressed in this post in accordance with InvestorPlace.com publication guidelines.

Scientist, researcher and author Victor Zarev focuses on providing an accurate and comprehensive explanation of the complex world of technology stocks.

Musk’s “Project Omega” May Be Set to Mint New Millionaires. Here’s How to Get In.

READ | June 2024: 3 Tech Stocks for the Coming Bull Run

---