If you want to know which growth stocks to sell this month, you’re in the right place. Growth stocks have had a tremendous start to 2024. Between artificial intelligence (AI), semiconductors, quantum computing and other cutting-edge breakthroughs, this is a promising time for the sector.
Even with all these promising developments, however, that isn’t a green light for all growth stocks. In fact, much of the rally in growth stocks was premised on the idea that the Federal Reserve would start cutting interest rates meaningfully in 2024. Instead, the economy remains strong and inflation hasn’t declined as much as anticipated.
Between high valuations and the potential for the Fed walking back prior support to the market, the growth space could be set for a major correction.
However, not all growth stocks are created equal. In fact, some are quite risky here following their tremendous rallies over the past year. These are seven growth stocks to sell that look especially risky for March 2024 and beyond.
Growth Stocks to Sell: Crowdstrike (CRWD)
Crowdstrike (NASDAQ:CRWD) is the epitome of a good company selling at a ridiculous price. While Crowdstrike has a promising business with favorable growth prospects, the market has gotten far too optimistic, setting up inevitable disappointment later this year.
Many software-as-a-service (SaaS) companies traded up to incredibly high price-to-sales ratios in 2021 and then saw their share prices collapse in 2022 as financial gravity kicked in. You might think that investors would learn their lesson from the collapse of these formerly high-flying software firms.
And yet, Crowdstrike has recovered all of its 2022 losses. In fact, with a more than 150% rally over the past 12 months, CRWD stock has now reached new all-time highs. This time around, traders are pointing to potential AI benefits in the cybersecurity space. That could well be the case, but it will be a competitive race to deploy AI in cybersecurity and it’s far from assured that Crowdstrike will be the ultimate winner.
But with CRWD stock at more than 80 times forward earnings and at nearly 20 times forward revenues, Crowdstrike is priced for perfection. Any slowdown in revenues or disappointment on the AI front could lead the share price to crash.
Uber Technologies (UBER)
On paper, it seems like Uber Technologies (NYSE:UBER) should be a tremendous business. The company is a classic marketplace with tremendous network effects, and it gets to grab a piece of millions of transactions across mobility, food delivery, and other such services.
In addition, Uber has had a massive opportunity to build brand awareness and loyalty in recent years. The pandemic caused a huge disruption to shopping and dining out, giving Uber the chance to impress customers with efficient food and grocery delivery.
And while Uber has grown its business and seen revenues surge, it has still struggled to convert that into consistent profitability. UBER stock is going for a lofty 65 times forward earnings right now.
It seems unlikely that Uber will be able to push profitability that much farther from here, either. The company is increasingly facing regulatory pushback as consumers and restaurant owners complain about high fees and drivers claim that they are underpaid. All this suggests that Uber will struggle to raise its margins from here which in turn would imply that shares are dramatically overvalued.
Growth Stocks to Sell: Dell Technologies (DELL)
Many investors probably remember Dell Technologies (NYSE:DELL) as a company that makes personal computers. And Dell still has a large consumer electronics business to be certain.
However, it merged with EMC in 2016, and in doing so, it became a leader in storage, information security, and consulting functions as well. DELL stock has hummed along, largely under the radar, for many years due to its largely unglamorous collection of business operations.
That has changed recently, however, with DELL stock rising an incredible 199% over the past 12 months.
In particular, DELL stock has soared more than 35% over the past month. This came following an earnings report where Dell highlighted rapid growth in its AI server sales. Despite this, however, Dell’s overall revenues actually declined 11% year-over-year for the quarter.
At this price, investors are pricing in way too much optimism based on Dell’s AI functions, even as the overall business is not showing much favorable momentum. Morningstar’s William Kerwin agrees; he believes DELL shares are worth just $55 each, implying that the stock has more than 50% downside from here once the AI server hype fades.
Soundhound AI (SOUN)
Like Dell, I believe Soundhound AI (NASDAQ:SOUN) has rallied more due to general enthusiasm around artificial intelligence than any specific strengths at this particular company.
Soundhound AI is a small unprofitable firm that aims to develop and commercialize voice, sound, and natural language artificial intelligence technologies.
SOUN stock quadrupled in February. This came due to news that Nvidia (NASDAQ:NVDA) had taken a position in Soundhound AI. Sounds great, right? However, Nvidia invests in a variety of smaller companies, and these bets can be quite small. Reportedly, Nvidia invested a modest $3.7 million in SOUN stock, which is better than nothing but not necessarily a massive vote of confidence either.
SOUN stock has cooled off a bit recently following a disappointing earnings report. While revenues grew sharply, the company reported a wider-than-expected operating loss and hasn’t even reached breakeven on an adjusted EBITDA basis yet. Shares seem wildly overvalued at their current $1.8 billion market capitalization given that analysts foresee just $70 million in revenues for 2024.
Growth Stocks to Sell: Celsius Holdings (CELH)
Energy drink marker Celsius Holdings (NASDAQ:CELH) has given its investors a jolt. CELH stock is up 200% over the past year, and a stunning 7,000% over the past five years.
Needless to say, early investors in Celsius have enjoyed blockbuster returns. But at some point, the risk/reward ratio turns against shareholders. We are at that point today following Celsius stock’s 56% year-to-date rally.
Incredibly, Celsius has posted these incredible gains even as the company’s latest quarterly report saw its earnings per share fall short of expectations. Yes, revenues are still soaring, but the firm appears to be giving up ground on pricing to drive its revenue growth, leading to slipping profit margins.
In the bigger picture, Celsius had a tremendous run when it was a small company. But it is now a more mature business with fewer growth opportunities that faces robust competition. This will make it exceedingly difficult for CELH stock to maintain its current 80 times forward P/E ratio.
Eli Lilly (LLY)
Eli Lilly & Co. (NYSE:LLY) is a leading pharmaceutical company that offers treatments for a wide variety of ailments.
The firm has enjoyed incredible performance over the past year thanks to its GLP-1 drugs, including Mounjaro, which have become blockbuster products for helping with weight loss and diabetes management.
These drugs are helping lots of people, and the company’s sales are likely to continue to grow in the coming years. However, the valuation has seemingly gotten way out of hand, with LLY stock up more than 125% over the past year. Eli Lilly now has a market capitalization of almost $700 billion and sells for a stunning 60 times forward earnings.
Analysts project that Lilly will bring in about $41 billion in annual revenues this year, and topline growth is around 20%. That’s a lot of money, but it’s not nearly enough to support a $700 billion market cap given the short patent lives of pharmaceutical drugs before they give way to generic competition.
Eli Lilly is enjoying a windfall right now, but the party is going to end a lot sooner than LLY stockholders realize.
Cava (CAVA)
Cava (NYSE:CAVA) is a fast-casual Mediterranean restaurant chain. The company completed its IPO in 2023 and the stock has now doubled since last fall.
It’s hard to see why there is so much enthusiasm, though. The bull case is that Cava can be the Chipotle of Greek food. In a vacuum, that may sound like an enticing pitch. But many fast casual chains have tried to become the Chipotle of some specific cuisine and the vast majority invariably fizzle out.
The fast casual dining market is far more competitive than it used to be. And inflation and economic strain are putting pressure on consumers. This adds up to a scary outlook for CAVA stock given that it is trading at a jaw-dropping 200 times forward earnings and 10 times revenues today. Those sorts of multiples are hard for restaurants to maintain even if their business execution is perfect.
My guess is that Cava will be more like the next Shake Shack (NYSE:SHAK). Shake Shack, you may recall, went public back in 2015 and became a momentum stock for a time with traders bidding it up fourfold following the IPO.
Since then, SHAK shares have underperformed despite a dramatic amount of growth in its underlying business. Given Cava’s similarly sky-high multiples, it will take many years for the company’s growth to catch up with today’s stock price, if it ever does at all.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.