Seeking Alpha
Profile| Send Message|
( followers)  
These tech stocks have been trading near their 52 week highs with very rich PE ratios. As the huge recent drop in Finisar (NASDAQ:FNSR) shares has reminded us, when tech stocks have disappointing news or earnings from high valuation levels, the results can be devastating for shareholders. It seems that some investors have forgotten what can happen when stocks trade for 40, 60, even almost 100 times earnings. I think these are great companies but at what price? It looked reasonable when some investors were willing to pay high PE ratios for fast growth companies like Cisco (NASDAQ:CSCO) or Microsoft (NASDAQ:MSFT), 10 to 12 years ago but if you did, you likely lost money or broke even after holding those names for about a decade. The tech stocks below are trading at valuations that appear to be priced at levels where it will be hard to provide sufficient returns for the risks these investors are taking.
These names have high to very high PE ratios and are seeing repeated insider selling. They are trading at the high end of their 52 week range and appear overvalued. Here are the six companies:
Synchronoss Technologies, Inc. (NASDAQ:SNCR) shares are trading at $31.11. Synchronoss is a leading technology company that provides business solution products. The 50 day moving average is $31.05 and the 200 day moving average is $23.41. These shares have traded in a 52 week range between $14.63 and $35.43. Earnings estimates for SNCR are just 85 cents per share in 2011, which puts the PE ratio around 35 on these shares. You can see the insider selling here.
Red Hat Inc., (NYSE:RHT) shares are trading over $40. Red Hat provides open source software solutions. The 50 day moving average is about $43.38 and the 200 day moving average is about $38.94. These shares have traded in a 52 week range between $26.69 and $49. Earnings estimates for RHT are about 79 cents per share in 2011, so the PE ratio is about 50 on these shares!!!! These shares have just dipped below their 50 dma, so the next stop might be around the 200 dma at $38.94. You can see the insider selling here.
Rightnow Technologies, Inc. (NASDAQ:RNOW) shares are trading at $31.71. Rightnow provides customer relationship management software. The 50 day moving average is about $27.07 and the 200 day moving average is about $21.51. The relative strength index is about 72 which indicates these shares are overbought. These shares have traded in a 52 week range between $13.21 and $32.43. Earnings estimates for RNOW are about 52 cents per share in 2011. This puts the PE ratio at about 60! You can see the insider selling here.
Rackspace Hosting, Inc. (NYSE:RAX) shares are trading at $36.28. Rackspace provides hosting and cloud solutions. The 50 day moving average is about $35.06 and the 200 day moving average is about $25.80. Earnings estimates for RAX are about 55 cents per share in 2011. This puts the PE ratio at about 68. You can see substantial insider selling here.
Taleo Corp. (NASDAQ:TLEO) shares are trading at $32.81. Taleo is a leading provider of recruiting and talent management software. The 50 day moving average is $31.35 and the 200 day moving average is $28.43. These shares have traded in a 52 week range between $21.97 and $34.05. Earnings estimates for TLEO are about 90 cents per share in 2011. This puts the PE ratio at about 35. You can see the insider selling here.
Verisign, Inc. (NASDAQ:VRSN) shares are trading at $35.70. Verisign provides a variety of Internet services. These shares currently trade above the 50 day moving average of $34.60 and the 200 day moving average of $30.23. These shares have traded in a 52 week range between $24.59 and $37.57. Earnings estimates for VRSN are about $1.45 per share for 2011. You can see the insider selling here.
I believe the rich valuations in these stocks represent a solid opportunity to cash in and rotate into less expensive stocks, as these could drop sharply from very lofty levels.
The data is sourced from Yahoo Finance. The information and data is believed to be accurate, but no guarantees or representations are made.



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 6 Richly Valued Tech Stocks Being Sold by Insiders