3 Absurdly Expensive Stocks That Investors Should Think Twice About Buying
The bull market looks to be in full force as valuations continue to rise higher for many stocks. That increases the chance that investors who continue to chase stocks at their highs could end up holding the bag later on if a correction occurs. There are many stocks out there right now with valuations that look to be in speculative territory. At these levels of valuation, it has become nearly impossible to justify their price tags.
Three of these hot stocks that investors should be extra careful about these days are MicroStrategy (NASDAQ: MSTR), Palantir Technologies (NASDAQ: PLTR), and CrowdStrike (NASDAQ: CRWD). Although they have generated some fantastic returns for investors, you may want to consider taking a second look at these stocks before deciding to invest in them, as their valuations are at absurdly high levels.
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MicroStrategy has benefited from the rally in cryptocurrencies this year, with Bitcoin reaching record levels. The company is raising money in order to buy more Bitcoins, and while that can win over crypto investors in the process and lead to more excitement, it also means there’s more risk with the stock.
There’s little sense in trying to justify MicroStrategy’s valuation because, at more than 4,000 times its trailing earnings, it’s clear that investors are treating this as more of a cryptocurrency than your average growth stock. MicroStrategy’s market cap is around $90 billion, which is astounding when you consider that the business has generated less than $500 million in sales over the trailing 12 months. This is a largely speculative stock to own, and while it is technically involved with providing business intelligence solutions to companies, it’s the crypto avenue that is driving up the share price these days.
Year to date, the stock price is up over 513% as of November. But before you consider buying MicroStrategy stock, you should be aware that it will likely rise and fall along with Bitcoin. And if you aren’t prepared for that potential roller-coaster ride, you may be better off sitting on the sidelines than buying shares of MicroStrategy.
Palantir’s 307%-plus gains so far this year almost look modest when compared to MicroStrategy, but this, too, is another highly expensive investment to add to your portfolio today. The good news is the company looks to be heading in the right direction in growing its sales and profits, and it’s likely to join the Nasdaq-100 in the near future, given its massive $150 billion market cap.
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