These aren't the carefree
days we saw around the turn of the century. But there are plenty
of technology stocks out there that are wildly overvalued.
For the most part, investors have toned down their salivating
for technology stocks with huge "upside".
, or the way unprofitable social media stocks such as
have gotten thumped since going public in the last year or
However, a few tech stocks are skating by on little more than
smoke, mirrors and the likelihood that most investors don't
completely understand what the companies do. That's a direct
violation of Warren Buffett's "Buy What You Know" creed.
With U.S. markets hovering near
despite financial headwinds out of Europe and a stagnating U.S.
economy, there are more than a few stocks - tech or otherwise -
that are a bit overinflated at the moment.
Some have gotten such a free pass, however, that it's as if
they're being snatched up solely by starry-eyed, dot-com-boom era
Here are three tech stocks that have become laughably
overinflated. Tread lightly while reading about them - a slight
pinprick to any one of these bubble dwellers and they'll
Stock Price: $105
Market Cap: $11.1 billion
LinkedIn is basically Facebook for professionals. Then why is
it that the stock has gained 11% since its IPO last May and is
now trading for more than five times what Facebook is selling
for? Take another glance at that trailing P/E ratio…861 times
earnings! Only eight other stocks on the entire market are that
overvalued, and they're all either small caps or mid caps.
LinkedIn has only hauled in $23 million in profits the last
three years. Its profit margin is a razor-thin 1.8%. Its earnings
have slipped each of the past two quarters. And yet, the stock is
up 65% this year and the company boasts an $11 billion
Add it all up, and it's a recipe for a stock that's about to
Stock Price: $147.60
Market Cap: $20.3 billion
Ever heard of this company? Me neither. Nevertheless, it's a
$20 billion company with a stock that costs more than
Exxon (XOM), Microsoft (MSFT)
General Electric's (GE)
What Salesforce does is customer relationship management
(hence the ticker symbol) by offering cloud computing solutions
to large businesses and enterprises. Whatever that means.
The company hasn't turned a profit in at least four quarters
and has a negative operating margin. And yet, it costs roughly
150 smackers just to buy one share. No thanks.
Red Hat (RHT)
Stock Price: $58.13
Market Cap: $11.2 billion
Another company that might make Warren Buffett cringe. Red Hat
is the world's leading open source and Linux provider. It is
profitable, with net income growing 68% the last two years. But
after gaining roughly 40% this year, the stock is now trading at
75 times those earnings.
Red Hat's profits have been holding steady each of the last
four quarters, alternating between $35 million and $40 million.
That's not enough growth to rein in the company's outsized P/E
Like the other two stocks on this list, Red Hat raises -
sorry, had to do it - a lot of red flags.