Seize the moment and profit from over-priced tech stocks before it's too late.
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The rapid rise of tech stocks, fueled by advances in artificial intelligence (AI), has led to ongoing debate over whether the recent rally is a temporary bubble or a new sustainable trend.
Critics of current valuations point to similarities with the unsustainable rise of high-flying tech stocks during the dot-com boom of the late 1990s. However, while that initial rise ended in a sharp correction, the underlying technology continued to develop and many companies have since reached new heights.
Institutional investors have recently taken profits from surging tech stocks as major indexes hit new highs. While this may reflect a careful rebalancing of portfolios, some high-flying tech stocks still appear to be significantly overextended and are likely to be subject to significant corrections in the short to medium term. May be exposed.
Three booming tech stocks are currently showing lofty valuations combined with an overbought relative strength index (RSI) is a candidate for profit-taking consideration.
Zoom Info Technologies (ZI)
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zoom info (NASDAQ:ZI) is one of the most overbought tech stocks, with an RSI level of 79. The company's price-to-earnings ratio (P/E) is 62.2 times, well above the tech sector average of 44.8 times.
Although the company reported revenue and bottom line growth, with EPS up an impressive 70% year-over-year, it was still below analyst consensus. That doesn't matter to investors, whose tech stocks soared 14% after the announcement, thanks to hopes for AI solutions. However, since then, the company's guidance has been broadly in line with expectations, and the stock has trended lower. This could mean that traders overplayed their hand following the earnings results, and the stock price could fall in the short term in line with the results.
Ziff Davis (ZD)
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jiff davis (NASDAQ:ZD) is also well into overbought territory at 76.9, but the P/E is even higher at 83.5.
ZD has been on a roller coaster ride this year, keeping pace with other high-flying tech stocks. The company reported a decrease in profits compared to the previous year. A decline in full-year cash flow would prevent the company from initiating dividends and other mechanisms to support the rally in tech stocks.
The company owns a portfolio of web content sites, including Mashable, PCMag, and BabyCenter, but the current recession, which is impacting previously high-flying tech stocks, has seen many online media companies lay off or close. The company may face headwinds as it is forced into
Interlink Electronics (LINK)
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interlink electronics (NASDAQ:Link) is trading near overbought levels based on the RSI value of 71. However, his P/E ratio is 132 times, which is more than the company's 5 times. S&P500 Concerns remain regarding the index. The human-machine interface device supplier has not yet reported fourth-quarter results, which are typically released in late March. It remains unclear whether the underlying performance of tech stocks supports that valuation.
LINK has been mostly stable since reporting third-quarter results with significantly lower available cash. Despite having less cash on hand, the CEO commented optimistically that further acquisitions would be pursued rather than returning capital to shareholders through dividends. If Interlink is unable to maintain 60% revenue growth as previously reported, the company's high stock valuation against skyrocketing tech stocks could come under pressure.
On the date of publication, Stavros Tusios did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer and are influenced by InvestorPlace.com. Publishing guidelines.
