3 Overvalued Large-Cap Tech Stocks Wall Street Thinks Have Run Too Far, Too Fast
StockNews
Published Jun 16, 2021 03:06PM ET
Updated Jun 16, 2021 04:30PM ET
3 Overvalued Large-Cap Tech Stocks Wall Street Thinks Have Run Too Far, Too Fast
The increasing demand for tech products and services has lately been driving the prices of many large-cap tech stocks to fresh highs. However, rising production costs are expected to mar these companies’ revenue and earnings growth in the coming quarters. Examples are Taiwan Semiconductor (TSM), Palantir (PLTR), and Fortinet (NASDAQ:FTNT). Their shares have rallied significantly to hit price levels that look unsustainable given the companies' moderate growth prospects. So, Wall Street analysts expect these stocks to lose some value in the near term. Let’s take a closer look at these names. As businesses' rapid digitalization creates robust demand for tech products and solutions, the shares of many large-cap tech companies are soaring to new price highs. Continued demand for improved networking, data storage, and IoT devices in the coming 5G era, along with the adoption of hybrid work structures, have been driving the performance of major tech companies lately.
Investor optimism over the tech industry’s growth prospects is evident in the iShares U.S. Technology ETF’s (IYW) 9% returns over the past three months compared to the SPDR S&P 500 ETF Trust’s (SPY) 7.1% gains. However, production disruptions caused primarily by a global semiconductor chip shortage have reduced the sales and earnings of most companies in the industry. Against this backdrop, the momentum of many large-cap tech stocks looks unsustainable, making them susceptible to a pullback in the near term.
Taiwan Semiconductor Manufacturing Company Limited (TSM), Palantir Technologies Inc. (PLTR), and Fortinet, Inc. (FTNT) have hit price levels that are not justified by their growth potential. So, Wall Street analysts expect these stocks to retreat in the near term.
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