Growth stocks are names that are anticipated to grow at a rate significantly above the market itself. The companies listed below are expected to grow a great deal by their most zealous advocates. However, the firms profiled in this column are extensively overvalued. These growth stocks to sell are likely to disappoint bulls while their valuations are far too high.
Importantly, the valuations of some of these growth stocks to sell have become stretched in recent weeks due to the revival of the meme-stock trend. But the momentum is generally weak. And many of these names are unable to sustain even the initial gains they’ve registered. I believe that most or all of the momentum will be lost in the medium-term. With that in mind, here are three growth stocks to sell.
GameStop (GME)
Troubled retailer GameStop (NYSE:GME) has risen on the back of the meme stock revival. This has been helped by positive remarks about GME stock by Roaring Kitty, the meme-stock investor and commentator.
But Roaring Kitty, who holds 120,000 call options on GME stock that expire on June 21, is likely focused on obtaining large, short-term gains from his involvement with the name. While it’s true that he also owns 5 million shares of GameStop, he can quickly sell that position as well.
And speaking of unloading the company’s shares, CEO Ryan Cohen’s stake in the firm has dropped to 8.6%, versus 10.5% last month. Cohen’s decision to sell a large number of the company’s shares does not bode well for its longer-term outlook.
Another negative for GME is the fact that GameStop recently sold an additional $2.14 billion of its shares. And the 29% decline in the firm’s first-quarter revenue versus the same period a year earlier likewise makes me more bearish on the name.
AMC Entertainment (AMC)
AMC Entertainment (NYSE:AMC) is another meme name. However, the momentum of AMC stock appears to have greatly weakened in recent weeks. After hitting a recent high of $11.88 at the beginning of the meme-stock revival, the stock price is now not much higher than the $4.54 low it on March 15.
Meanwhile, another InvestorPlace columnist, Rich Duprey, recently reported that Furiosa: A Mad Max Saga, one of this year’s summer blockbusters, probably won’t be profitable. That indicates that the film isn’t drawing a large number of viewers, boding poorly for AMC’s Q2 performance. Duprey believes that two other movies due out soon, Deadpool & Wolverine and Despicable Me 4, will perform better at the box office. Still, as he points out, ” it’s tough to run a business on just a pair of hits every year.”
And as I noted in a recent column, the company’s attendance in the U.S. dropped 5.8% in Q1 year-over-year. Meanwhile, it burned a huge $268 million of cash in the 12 months that ended in March.
Overall, I think it’s clear that AMC’s fundamentals are quite poor.
Alibaba (BABA)
Chinese e-commerce and cloud giant Alibaba (NYSE:BABA) is facing very tough competition on multiple fronts.
BABA stock is being threatened by the rapid growth of two other Chinese e-commerce firms, JD.com ( NASDAQ:JD) and PDD Holdings (NASDAQ:PDD). Alibaba’s share of the Chinese e-commerce market tumbled to 37% last year from 80% in 2017.
Bloomberg recently noted that Alibaba’s cloud unit slashed its prices by as much as 97%. The company even lowered the prices that it charges for nine of its artificial intelligence-powered offerings.
In Q1, Alibaba’s EBITDA fell to $4.82 billion from $4.97 billion during the same period a year earlier.
Given these points, BABA stock definitely belongs on everyone’s list of growth stocks to sell.
On the date of publication, Larry Ramer did not hold (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.