The 2020 pandemic hit many companies hard, while other companies took it as a chance to grow, seemingly unaffected by the state of the world around them. NVIDIA (NASDAQ:NVDA) came out as one of those thriving businesses and achieved gains of 122% in 2020. The company’s graphics processing units (GPUs) were present and needed for trends that accelerated exponentially due to the pandemic, boost...
The reasoning behind all investments is as follows: you give away a certain amount of your savings to a particular company while expecting for it to eventually be able to give you back that same amount plus a more desirable bonus.
When under that reasoning, spending a significant amount of money on a single company’s stocks should be of no issue, as long as it has decent enough prospects to deliver back.
But the risk is always present. A high-priced stock doesn’t necessarily mean that the company behind it is profitable, nor does it mean that it currently is on a path towards growth. And the chances of facing yourself with a company with way too overvalued stocks are just enough.
How could this affect you? Well, investing in one of these stocks could prove extremely harmful to your portfolio, as your necessary expenses would more than likely limit your returns, sometimes even establishing an actual loss.
To help you protect your portfolio from harm, here are some overvalued stocks we don’t recommend at all for investment.
GoodRx (NASDAQ: GDRX) is an American healthcare company dedicated to making it easier for the average consumer to buy prescription medicine. While it has a strong company mission to back up its efforts, sadly, it has almost no advantage over its market competitors.
Recently, GoodRx has found itself in a constant struggle to beat Amazon in the pharmacy business. The latter has now made it possible for customers to purchase their medications through its Amazon Pharmacy division. In addition, this same division has also offered a good deal of money-saving benefits, which of course has brought the attention of even more clients over its competition.
The company’s most recent struggles in reaching new heights provoked significant losses for its last two financial quarters. However, its more recent numbers show that it is now recovering from said low point.
Nevertheless, those same numbers also shed some light on yet another issue for the company. It is spending way too much money on its day-to-day operating expenses. As of today, those expenses represent 130% of its actual revenue. And if that were not enough, if newer competitors were to appear in a nearby future, those expenses would only rise in quantity.
In short, GoodRx is a company that is not prepared at all for a competitive market, even if it already is part of one. The utmost possible scenario is that its stocks will fall even further, making it a bad investment choice overall.
Regardless of the current price of its stocks, you are better staying away from them.
Surprisingly to most people, Twitter’s (NYSE: TWTR) numbers aren’t as big as one would expect.
Last fiscal year, it was only able to grow 7.4% in the market, low numbers for a growth stock.
As many people decide to invest in Twitter with the idea of it having exceptional growth prospects, the following has to be said. In reality, Twitter currently isn’t showing any reason for investors to believe it can or will grow in the near future.
Since the company has already set its clear picture of what does the social platform need to be successful, in doing so, it has also limited any potential worthwhile improvement. Any new idea could only bring upon one of two scenarios: either the concept is way too insignificant to make a noticeable difference, or it would mix up the Twitter formula way too much.
Regardless of which of the two scenarios comes to fruition, the possibility of reaching any financial increase that’s worthy of a growth stock stands as something improbable.
Even if it all looks like a perfectly stable investment, you instead just massively limit what you are getting in return. In other words, for its stocks’ current value, you truly aren’t getting any significant amount of profit back.
Carnival (NYSE: CCL) is a well-established international cruise line that has gotten a bit of a spotlight among investors recently. In the last 12 months, the value of its stocks rose a staggering 159%.
This, of course, led many to believe that the company was doing exceptionally well, and it even had some external reasoning backing it up. As vaccine rollouts were taking place, it was safe to assume that fully vaccinated customers were getting confident enough to travel again.
However, on April 7th, the company reported a net loss of $1.97 billion in the first quarter of the fiscal year. In response, the company tried to justify their rise in stock prices by detailing that their clientele bookings were 90% higher than those from their last working period.
Sadly, their current earnings due to returning customers are nowhere near to covering such a significant loss. And with cruises being known as one of the most potential places where people can contract the COVID-19 virus, there is no reason to believe the said number will increase in the much-needed quantity.
While the company isn’t set to run out of money in the near future entirely, there is still a significant probability that the company’s remaining shareholders opt out. It is easy to understand why; there isn’t much of a reason to invest in this business at all for now.