After experiencing exorbitant growth last year, these 2 stocks increased by 760% and 385% and are now at high risk of collapsing.
These 2 stocks are overvalued and should be sold immediately according to industry experts, after an increase of 760% and 385% respectively.
Raising the alarm on the extremely high valuations of global shares, especially in the technology sector, is Amundi, one of the main European asset managers: Big Tech shares are overvalued by 60% compared to the MSCI for developed markets. This - according to experts - could increase the risk of a significant sell-off soon.
A similar concern was also shared by other industry experts, including analysts from JPMorgan Chase and Goldman Sachs, who highlight the potential negative impact of events such as a possible delay in the rate cut Fed or a stock market correction, which could be particularly dramatic given investors’ overly bullish positions on US tech stocks.
1) Super Micro Computer (SMCI)
Super Micro Computer has grown by 760% since the beginning of 2023 and has attracted the interest of investors and market analysts, raising questions about the stock’s actual valuation. While some see Super Micro as an opportunity worth seizing, others are cautious, fearing that its value may be over-inflated. To fully understand the investment potential of Super Micro, it is crucial to analyze the factors that have contributed to its success and the challenges it may face in the future.
- Daily graph Super Micro Computers (Nasdaq)
- Source: Tradingview
Super Micro is a leading provider of dedicated server solutions for artificial intelligence (AI), thanks to its ability to offer innovative and high-performance solutions. Growing demand for computing power for AI applications has lifted the value of Super Micro’s shares, reflecting investor optimism about the company’s crucial role in an expanding industry.
Super Micro’s strategy is based on technological innovation, with a particular focus on the speed in bringing new data center solutions to the market. Its commitment to maintaining market leadership is also evident in its strong financial performance, with significant increases in revenue on an annual and quarterly basis. Furthermore, its strong presence in the US market and its ability to attract large customers in the data center and cloud service provider sectors are key elements of its success.
To maintain its leading position, Super Micro is expanding manufacturing capabilities by opening new plants in the United States and Malaysia, as well as investing in research and development to perfect liquid cooling technologies. This strategy not only promises to attract new customers but also to consolidate relationships with existing ones, thanks to the promise of unprecedented energy efficiency and a reduction in operating costs.
However, despite the current success, investors should pay attention to the potential risk of the stock being overvalued. The rapid increase in the value of Super Micro’s shares could make the stock vulnerable to a significant sell-off if investor expectations are not met or if there is a market correction in the technology sector. Therefore, while Super Micro offers attractive growth opportunities, investors should carefully evaluate the risk and potential reward before making investment decisions.
2) Nvidia
Graphics card giant Nvidia is another stock under investor scrutiny following its impressive growth of 385% since the start of 2023. The company is currently valued at over $1.73 trillion, with a Forward P/E ratio of 56, a figure that has set off alarm bells for many market experts, who consider the stock overvalued by 20%.
Nvidia’s intrinsic value, calculated using the discounted cash flow (DCF) model based on earnings, is $253.44. However, using the trailing twelve months’ free cash flow, the DCF intrinsic value based on free cash flow is $219.50. These ratings suggest that Nvidia may be significantly overvalued, with a negative margin of safety of -201.41%.
- Nvidia daily graph
- Source: Tradingview
While generative artificial intelligence (AI) has catalyzed the excitement around Nvidia, analysts warn that investors may be too optimistic about its future prospects. They highlight the importance of carefully evaluating Nvidia’s true earnings potential and cash flow, rather than giving in to speculative expectations based on AI hype. The bubble could in fact explode.
Furthermore, when compared to other companies such as Apple and Tesla, Nvidia seems less attractive to some analysts. While Nvidia stock saw a notable 37% increase throughout 2024, Apple saw only a modest 1% decline and Tesla suffered a significant 25% decline. This leads some investors to prefer companies that have shown greater stability and resilience against market fluctuations.
|DISCLAIMER
The information and considerations in this article should not be used as the sole or primary basis for making investment decisions. The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk propensity and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public for savings.| Original article published on Money.it Italy 2024-02-11 08:19:00. Original title: 2 azioni sopravvalutate da vendere subito
