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Overvalued Tech Stocks Have Taken a Beating Today

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Sep. 9 2019, Updated 2:32 p.m. ET

The S&P 500 ETF is down 0.08% today, and the Technology Select Sector ETF (XLK) has fallen 0.8% on the day. Several tech stocks are trading in the red. However, it’s the overvalued ones that have fallen significantly.

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Alteryx: An overvalued data analytics pioneer

Shares of Alteryx (AYX) have fallen 13.7% today. The stock is currently trading at $122.65, which is 17% below its 52-week high. The stock has gained 106% year-to-date despite the pullback.

AYX has a market cap of $8 billion, which is 21x its 2019 sales. Alteryx is trading at a forward PE multiple of 157x. Analysts have a 12-month average target price of $139.23, which is 13.5% above its current price. AYX has gained 687% since its IPO in March 2017.

CrowdStrike: Volatile since IPO

Cybersecurity company CrowdStrike (CRWD) has lost 11.6% today and is down 23% in the last three trading days. Although CRWD posted robust quarterly results last week, investors were left wanting more, driving shares lower.

CRWD has a market cap of $12.9 billion, which is 29x its fiscal 2020 sales. CRWD is trading 34% below its 52-week low of $101.88. Analysts have a 12-month average target price of $92, which is 37% above its current price. CRWD has gained 18% since its IPO in June.

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Twilio: Another overvalued tech stock

Twilio (TWLO) is another overvalued stock that has been trading at a premium. The stock has fallen 9.3% today and is still up 25.7% year-to-date. Twilio investors have lost close to 26% since July 26.

Twilio stock is trading at a forward PE of 361x and is valued at $16 billion or 14.3x its 2019 sales. The company’s earnings are expected to grow 54.5% in 2019, 82.4% in 2020, and at an annual rate of 33.2% in the next five years.

Analysts have a 12-month average target price of $151.62, which is 35% above its current price. Twilio has gained 206% since its June 2016 IPO.

The Trade Desk: A digital advertising disruptor

Another overvalued stock, The Trade Desk (TTD) has lost 9.7% today. TTD has returned 81% year-to-date despite the pullback it experienced today. The stock is valued at $10 billion or 15x its 2019 sales.

It’s trading at a forward PE multiple of 57x. Comparatively, its earnings are estimated to rise 17.8% in 2019, 14.8% in 2020, and at an annual rate of 30% in the next five years.

Analysts have a 12-month average target price of $261.25, which is 24% above its current price. TTD has gained 621% since its IPO in September 2016.

Among the other expensive stocks, Okta (OKTA), CyberArk, ServiceNow, and Roku have fallen 8%, 5%, 4.7%, and 4.1%, respectively, today.

In our view, all these tech stocks were overvalued, expensive, and due for a correction. However, the growth story for each stock is far from over. Last week, we identified Alteryx, Roku, ServiceNow, and Twilio as stocks to buy at major dips.

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