These 5 Stocks Are Overvalued, Should You Sell?

Like Nvidia Corp. NASDAQ:NVDA continues to lead the S&P 500 index higher, even as other big tech companies like Microsoft Corp. NASDAQ:MSFT and Apple Inc. NASDAQ:AAPL retreat sharply, some investors are wondering whether Nvidia stock might be overvalued.

While Nvidia is the biggest stock in this market cycle, other recent winners are also being scrutinized as they have raced higher, with some analysts believing they are due for a pullback soon.

Wingstop Inc. NASDAQ: ALACelsius Holdings Inc. NASDAQ:CELHSouthwest Airlines Co. NYSE:LUVVistra Corp. New York Stock Exchange: VST and Dell Technologies Inc. NYSE: DELL they have all posted strong rallies, often a sign that large investors are ready to take profits.

How to deal with an overvalued stock

Those who hold a stock that appears overvalued have several ways to proceed, depending on their time horizon. Long-term investors might choose to hold the stock if they believe in its underlying fundamentals, while short-term traders might consider selling and wait for a more favorable entry point to re-enter.

The latter approach takes into account the opportunity cost; instead of suffering a withdrawal, the proceeds of a sale can be distributed elsewhere. In today’s market, even a high-yield savings account can be a place to park cash and earn a solid return.

Will Wingstop’s wings be clipped soon?

Wingstop shares have risen 50% over the past three months, with the stock working through its seventh consecutive month of upward price movement.

The mid-cap stock is a leader among restaurant stocks, and its P/E ratio of 147 reflects that rapid pace of growth. Wingstop’s earnings have increased at double-digit rates since 2020, and analysts expect that trend to continue this year and next.

However, the Wingstop chart offers a clue as to possible ways to handle this stock.

When a stock extends well above moving averages, as is the case with Wingstop, investors may consider selling or reducing exposure to mitigate potential losses.

Can Celsius Holdings maintain energy levels?

Celsius Holdings’ chart shows that the energy drink maker has gained 66.79% over the past three months. Celsius shares returned 28.45% last week following the company’s better-than-expected earnings report on Feb. 29.

Forecasts from Celsius analysts at MarketBeat show a consensus view of “moderate buy,” with a price target of $76.13. This is a decline of 13.21%, an indication that the stock is ripe for a pullback after such a rapid upward trajectory.

This is perfectly normal, as institutional investors often take profits after a big run, even if they simply reduce positions to rebalance their portfolios.

It’s Southwest Airlines Reach cruising altitude?

Southwest Airlines’ chart shows the stock breaking out of a steep cup-and-handle base with a peak-to-trough correction of 45%.

With this correction, the stock even lowered the pandemic-era low it reached in May 2020.

As it has been running on the right side of its most recent base, Southwest shares have risen 27.97% over the past three months. It is not unusual for a stock to pull back after a rally of this magnitude.

In a March 2 note, CFRA analyst Jonathan Handshoe downgraded his rating from “hold” to “buy,” saying: “While domestic travel has seen significant improvement following the Covid-19 pandemic, we believe that LUV could face significant headwinds as international travel surpassed domestic travel in 2023, and we believe this will continue to be the case in 2024.”

Vistra ready to shut down?

Utilities stocks aren’t typically among the market’s biggest leaders, but that’s exactly where Vistra is right now, outperforming the overall market by a wide margin.

The Vistra chart shows that the stock has risen 58.16% over the past three months. Vistra shares are currently trading at elevated levels, 13.2% above the short-term 10-day moving average.

Vistra’s dividend yield is 1.4%, relatively low by utility industry standards, but that’s partly due to the stock price’s rapid upward trend. The company has also returned capital to shareholders through share buybacks, which contribute to higher prices.

Vistra analyst forecasts show a consensus rating of “buy,” but note the price target of $46, a downside of 24.05%. While this stock has a lot to offer, rapid price appreciation cannot last forever.

Can Dell continue to grow with AI-driven earnings?

Dell shares fell from the gap 32% higher on March 1, following upbeat fourth-quarter results.

Earnings were $2.46 per share, up 12% year-over-year. Revenues of $25 billion also marked a 12% increase.

In a March 1 note, Morningstar analyst William Kerwin raised his estimate of Dell’s fair value to $55 from $46. However, this still implies a forecast of a significant pullback, as Dell shares are currently trading at around $120.

Kerwin wrote: “Dell has major market shares across all of its businesses, but these are predominantly commoditized, cyclical, price-competitive markets that, in our view, do not provide an economic moat for a leader like Dell. We expect Dell to see nothing more than modest revenue growth over the medium to long term and see little opportunity for material, sustained margin expansion.”

Forecasts from Dell analysts at MarketBeat show a consensus price target of $102.88, a downside of 14.08%.

Before considering Apple, you’ll want to hear it.

MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Apple wasn’t on the list.

While Apple currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

View the five stocks here