Tech stocks have come roaring back in 2023. But after the stunning rebound, some tech names have little room to run. In addition to industry-specific concerns, the technology sector faces headwinds from rising interest rates and a central bank that hasn’t finished its fight against inflation. As such, now seems like a good time to lock in gains on certain tech stocks that have rallied sharply this year. In particular, these three tech stocks look vulnerable and may see severe downside in the coming days and weeks.
Transdigm (NYSE:TDG)
Known for making aircraft parts and components, Transdigm has seen stellar returns through its unique approach of mergers, acquisitions, and aggressive pricing strategies. However, with the stock up 59% over the past year and trading at 44 times current earnings, it’s believed to be overvalued, especially considering the potential risks in the aviation sector.
Micron (NASDAQ:MU)
Micron has experienced a volatile ride due to the boom/bust cycle of the memory market. Despite a surge in revenues in 2022, the company faced significant losses in 2023, with a dismal outlook for the first quarter of 2024. Despite these challenges, MU stock has risen 40% year-to-date, which is seen as unjustified given its unstable history and poor prospects for the next year.
Endava (NYSE:DAVA)
Endava is a global IT services provider specializing in digital transformation, agile development, cloud migration, and automation solutions. This tech services company has been a frequent feature on my sell lists this year, and it’s time to flag it again due to its persistent underperformance.
Endava has seen some benefits from the trend of companies outsourcing tech and business services. However, the company is hitting a wall when it comes to attracting new clients and upselling to the existing ones. This has led to a stagnation in their top-line growth of quarterly revenue throughout 2023.
Looking ahead to 2024, while the global economy might dodge a full-blown recession, we’re still expecting an economic slowdown. This environment could continue to weigh down DAVA’s share price in both the short and medium term. If you’re holding Endava, it might be wise to reconsider your position.
