Market Madness: 3 Stocks That Have Reached Dizzying Heights
As the bull market continues to charge forward, many stock valuations have reached unprecedented levels. Investors who fail to exercise caution may find themselves holding the bag if a correction occurs. Among the plethora of overvalued stocks, three stand out as particularly egregious: MicroStrategy, Palantir Technologies, and CrowdStrike.
MicroStrategy: A Cryptocurrency in Disguise
MicroStrategy’s remarkable 513% year-to-date gain has been fueled by the surge in cryptocurrencies, particularly Bitcoin. With a market cap of around $90 billion, the company’s valuation is staggering, considering its trailing 12-month sales barely exceed $500 million. At over 4,000 times its trailing earnings, MicroStrategy’s stock is being treated more like a cryptocurrency than a growth stock. Investors should be aware that the stock’s fortunes are closely tied to Bitcoin’s, and a downturn in the cryptocurrency market could have devastating consequences.
Palantir Technologies: A Data Analytics Darling with a Hefty Price Tag
Palantir’s 307%-plus year-to-date gain may seem modest compared to MicroStrategy’s, but its valuation is still eye-watering. With a market cap of $150 billion, the company’s stock trades at 145 times next year’s estimated earnings – an unsustainable level for any growth stock. While Palantir’s sales and profits are growing, its valuation has become detached from fundamentals. Investors who buy in at current levels may be setting themselves up for a significant correction in the near future.
CrowdStrike: A Cybersecurity Star with a Lofty Valuation
CrowdStrike has largely recovered from a massive data outage in July, but its valuation remains elevated. With investors paying 80 times next year’s earnings, speculation is driving the stock’s price higher. While the company’s annual recurring revenue has topped $4 billion, and quarterly revenue has increased 29% year over year, the stock’s multiple is hard to justify. Investors should be cautious, as the business may struggle to meet the lofty expectations baked into its current valuation.
A Word of Caution
Investors who fail to exercise caution in this frenzied market may find themselves on the wrong side of a correction. It’s essential to separate speculation from fundamentals and consider the risks involved with investing in these absurdly expensive stocks.
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