Tech Stocks Investors Should Sell Before They Crash: Cyberark, Cisco, and Synaptics
The United States equities markets have been delivering outstanding returns for investors this year. With the S&P 500 up over 16% year-to-date and the Nasdaq Composite returning almost 33%, it’s clear that tech stocks have played a significant role in driving this growth. However, not all tech stocks are winners in this bull market. Inflation is still a concern, and a global economic slowdown looms on the horizon, posing threats to certain technology enterprises. In light of these challenges, it’s crucial for investors to be vigilant and decisive when it comes to their portfolios. Here is a list of tech stocks that investors should consider selling before they crash and burn.
First on the list is Cyberark Software (NASDAQ:CYBR), a cybersecurity software firm known for providing Privileged Access Management solutions. These solutions help organizations secure themselves against hackers and other security threats. While Cyberark has experienced double-digit revenue growth in recent years, a closer look reveals that much of this growth is due to a shift to a recurring revenue model. Gross margins have compressed, and the company is still operating at a net loss. Furthermore, Cyberark’s valuation is extremely high, trading at 145.7x forward EBITDA. Even accounting for future EBITDA generation, the stock remains overvalued. In addition, while many tech stocks have seen significant returns this year, Cyberark’s shares have only returned around 11% year-to-date. With an impending devaluation and lackluster share returns, it may be wise for current Cyberark shareholders to consider selling.
Next, we have Cisco Systems (NASDAQ:CSCO), a company that designs networking and wireless products that enable connectivity within and between organizations. While Cisco played a prominent role in shaping the internet as we know it today, it has been criticized for its lack of innovation and slow growth. Economists from the Institute of New Economic Thinking accuse Cisco of prioritizing shareholder returns through expensive share buyback schemes rather than focusing on innovative products. The company’s relatively low research and development expenses and over-reliance on third-party manufacturers have allowed competitors like Ericsson, Nokia, and Huawei to gain an edge in high-end communications technologies such as 5G. Cisco’s single-digit revenue growth over the past decade reflects these shortcomings. Although the stock has seen a modest return of around 11% year-to-date, investors seeking growth-inducing communications innovation may find better options elsewhere.
Finally, we come to Synaptics (NASDAQ:SYNA), a global developer and supplier of mixed signal semiconductor solutions. Synaptics provides wireless connectivity, system-on-a-chip, and integrated circuits products for various industries, including automotive, internet of things (IoT), and consumer electronics. However, the company has struggled with inconsistent revenue growth and profitability. While it saw nearly 30% YoY revenue growth in the previous fiscal year, its most recent earnings showed a contraction of 22% in annual revenue growth. Synaptics attributed this decline to a lack of demand for its products in the PC and mobile end-market. With such inconsistencies and an uncertain macro-economic environment, shareholders may have little to hope for. The stock is currently down almost 3% for the year.
In conclusion, while tech stocks have delivered outstanding returns overall this year, it’s essential to be discerning when evaluating investment opportunities. Cyberark, Cisco, and Synaptics are three tech stocks that may not be able to sustain their current valuations or provide the growth investors seek. Investors should consider their portfolios carefully and sell these stocks to avoid potential losses as market conditions evolve.
