© Reuters. 4 Overvalued Tech Stocks to Avoid in April
The sustained stock market rally over the past year has driven many technology stocks to significant overvaluation. While most of the COVID-19 pandemic winners are now witnessing a sell-off as investors rotate to potential post-pandemic winners, some tech players’ high valuations are still justified by their growth prospects. However, Shopify (NYSE:), Snowflake (SNOW), Affirm Holdings (AFRM), and Bill.com (BILL) are not among them. These names look highly overvalued now given their limited promise indicated in their financials. So, we think these stocks are better avoided in the near term.Technology stocks saw a skyrocketing rally in the wake of the COVID-19 market correction in March 2020. The rally caused many technology stocks to become significantly overvalued. As several developments and indicators began pointing to an economic recovery earlier this year, many investors found it wise to rotate their holdings into relatively undervalued stocks that have the potential to capitalize on the economic recovery.
The trend has led to a sell-off of expensive technology stocks. Nevertheless, the high valuation of many tech players is still justified given their enormous growth potential.
But the question is, can the overall technology sector make a comeback from its decline so far this year? Many analysts don’t expect the sector to regain its pandemic-driven momentum. Indeed, according to a CNBC article, the sector could witness further underperformance.
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