1. Amazon (AMZN)- The e-commerce giant has been on a tear over the past year rising from the high 40’s to $127 per share. Many analysts have placed a buy rating on the stock and price targets keep going up. Forward earnings are expected to come in at $2.58. Price-to-earnings growth is 2.5. This stock is priced for continued earnings growth of 20% or more. I like Amazon’s business model but the stock is currently trading at 75 times earnings. Any hint of slowing earnings growth over the next year and Amazon’s shares will get hammered.
2. Research In Motion (RIMM)- Research in Motion appears to be fairly valued and has been one of the best tech companies of the past decade. RIMM grew its revenue by over 40% last quarter but the smartphone market is becoming a crowded place with increasing competition from Apple (AAPL) and Google (GOOG). Palm (PALM) has just signed a deal with Verizon (VZ) to begin offering its smart phones at the nation’s largest wireless carrier. It appears that RIMM will have to increase spending on marketing just to maintain its current market share.
3. US Steel (X) - The nation’s largest steel company saw its shares decimated during the global recession. Shares have rebounded almost 300% from the $16 level. While I like US Steel as a long term holding; the stock has gotten ahead of itself over the near term. US Steel is trading at $65 a share and has a forward PE of 52. This is based on estimated earnings of $1.24. Some analysts are even anticipating a loss as large as $3 per share for 2010. If you were one of the smart investors that got in at $40 or below; it may be a good time to trim your position and take some profits.