3 Tech Stocks To Sell In August Before They Crash And Burn

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Overall, US stock markets continue to provide investors with outstanding returns this year. The Standard & Poor's (S&P) 500 is up more than 16% year-to-date, while the Nasdaq Composite has rebounded from its 2022 lows to provide investors with an annualized return of nearly 33%. Of course, what has contributed to this rise in tech stock valuations can be attributed to recent advances in generative AI . However, even in a bull market like the one we are experiencing, there are times when there are losers. Inflation is not yet fully under control and a global economic slowdown threatens a number of technology companies.

In these times, it is important for investors to be alert and decisive. Below is a list of tech stocks that investors should sell before the crash happens.

Cyberark Software (CYBR)

Cyberark Software (NASDAQ: CYBR ) is an information security software company that provides "privileged access management" to organizations that want to protect themselves from hackers and other security threats. Privileged access management refers to information security technology solutions designed to securely maintain and elevate the access and privileges of users, accounts, and systems within an organization. A business can use these Cyberark technologies to secure its cloud infrastructure and applications and protect the privacy of critical data. This particular sub-sector of the broader cybersecurity market was worth an estimated $2.5 billion by the end of 2022, and market experts predict the industry will grow to $20 billion by 2030.

The cybersecurity firm's revenue growth was in the double digits in 2022, but was in the single digits before. A big part of Cyberark's help is its move toward a recurring revenue model. However, gross margins have declined and net income remains negative. Also, Cyberark's rating is astronomical. The company's enterprise value trades at 145.7 times forward EBITDA. So even taking into account future EBITDA generation, Cyberark is still overvalued. Additionally, Cyberark's current valuation is not a result of the company benefiting from this year's bull market; With the company facing a massive downgrade and weak stock returns, current Cyberark shareholders would probably be better off selling before their positions burn.

Cisco Systems (CSCO)

Cisco Systems (NASDAQ: CSCO ) develops wireless and networking products to enable connectivity within and between organizations. The company's products have helped shape the Internet as we know and understand it today. Cisco products include Secure Agile Networks, which define key communication components in any organization, such as switches and routers, and End-to-End Security, a cloud-based cybersecurity solution that protects corporate networks. In 2022, the communications equipment giant reported revenue of $51 billion and net income of $11.8 billion, a net margin of about 23%.

Unfortunately, Cisco Systems, once the darling of Silicon Valley in the 1990s, has fallen into a path of slow growth and a lack of real innovation. A research paper written by economists for the Institute for New Economic Thinking accused the company of abandoning innovative products to maximize shareholder returns through expensive stock buyback programs. These fees are also based on Cisco's relatively low R&D costs. The statement also notes that the company's over-reliance on third-party manufacturers has allowed rivals like Ericsson (NASDAQ: ERIC ), Nokia (NYSE: NOK ) and Huawei, which had their own manufacturing teams, to advance into leadership positions. . Communication technologies such as 5G.

Cisco's slow single-digit revenue growth over the past decade only strengthens their case. The company's stock is up just over 11% year-to-date, but investors in the growth-driving communications innovation should look elsewhere, which definitely deserves to be on our list of low-tech stocks. effective.

Synaptics (SYNA)

Synaptics (NASDAQ: SYNA ) is a global designer and supplier of legendary mixed-signal semiconductor solutions. "Fableless" simply means that the company does not carry out its own production, but outsources these tasks to third parties. Synaptics products find many valuable applications in the automotive, Internet of Things (IoT) and consumer electronics industries. With an eye on the IoT market which will account for 63% of revenue in 2022, the company offers wireless circuit, system-on-chip (SoC) and embedded products. Wireless products are used to enable Wi-Fi and Bluetooth, while SoCs power a variety of audio and audio devices such as smart speakers.

Like the companies mentioned above, Synaptics suffers from inconsistent revenue growth and profitability metrics. Last year. The company ended fiscal 2022 (at the end of June) with annual revenue growth of 30%, but the latest release of fiscal 2023 results showed an overall decline in annual revenue growth of 22%. The company cited a lack of demand for the products in its PC and mobile phone markets. The disparity between Synaptics' financial performance and the global macro environment leaves little hope for shareholders. Shares of tech stocks are currently down nearly 3% year-to-date.

At the time of publication, Tirik Torres did not hold any position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com's publication guidelines.

Tirik Torres has been and is involved in the financial markets since university. His particular passion is helping people understand complex systems. His areas of expertise are semiconductor inventories and enterprise software. He has professional experience in both the investment sector (public and private markets) and investment banking.

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