3 Overvalued Tech Stocks to Avoid in January

NASDAQ: NOVT | Novanta Inc. News, Ratings, and Charts

NOVT – Despite the tech sector’s unprecedented growth amid the COVID-19 pandemic, certain tech stocks have become overvalued and are expected to underperform. So, it could be wise to avoid stocks Novanta (NOVT), Vocera Communications (VCRA), and Impinj (PI), as Wall Street analysts expect them to witness a downtrend in the near term.

The tech industry witnessed solid growth amid the pandemic and is expected to maintain the momentum with continued digitization across industries. However, positive investor sentiment has made certain stocks trade significantly above their intrinsic values.

According to Investment chief Richard Bernstein, investors could be hurt by “bubble assets” in the tech industry. He further said, “Valuations are very high and what you have to remember is the valuation is more important than the story.” In addition, high inflation and the upcoming interest rate hikes could hurt the tech industry’s growth next year.

Given this backdrop, it could be wise to avoid significantly overvalued tech stocks Novanta Inc. (NOVT), Vocera Communications, Inc. (VCRA), and Impinj, Inc. (PI). Wall Street analysts expect these stocks to witness a downtrend in the near term.

Novanta Inc. (NOVT)

NOVT designs, manufactures, markets, and sells photonics, vision, and precision motion components and sub-systems to original equipment manufacturers in the medical and industrial markets worldwide. Its segments are Photonics; Vision; and Precision Motion.  

On August 31, 2021, NOVT announced that it had acquired Schneider Electric Motion USA Inc. and ATI Industrial Automation Inc. However, this might negatively affect the company’s already existing weak financials.

NOVT’s revenue increased 24.3% year-over-year to $177.73 million for the fiscal third quarter ended October 1, 2021. However, its cash and cash equivalents came in at $102.39 million for the period ended October 1, 2021, compared to $125.05 million for the period ended December 31, 2020. Also, its total current liabilities came in at $187.97 million compared to $114.23 for the same period. Moreover, its total liabilities came in at $710.12 million, compared to $388.37 million.

In terms of forward EV/S, NOVT’s 9.54x is 125.9% higher than the industry average of 4.22x. Moreover, its forward P/S of 8.97x is 116.7% higher than the industry average of 4.14x.

NOVT has lost 4.4% since hitting its 52-week high of $184.44 on November 4, 2021, to close last trading session at $176.33. Moreover, Wall Street analysts average price target for the stock is $155, which indicates a potential decline of 11.21%.

NOVT’s POWR Ratings reflect its poor prospects. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

The stock has an F grade for Value. Click here to access the additional POWR Ratings for NOVT (Momentum, Growth, Stability, Sentiment, and Quality). NOVT is ranked #71 of 169 stocks in the D-Rated Medical – Devices & Equipment industry.

Vocera Communications, Inc. (VCRA)

VCRA provides secure, integrated, and intelligent communication and workflow solutions that empower mobile workers in healthcare, hospitality, retail, energy, education, and other mission-critical mobile work environments in the United States and internationally.

VCRA’s total revenue increased 18.1% year-over-year to $63.57 million for the third quarter ended September 30, 2021. However, its net income decreased 50.1% year-over-year to $2.08 million, and its EPS fell 53.8% year-over-year to $0.06. The company’s total liabilities came in at $364.38 million for the period ended September 30, 2021, compared to $225.81 million for the period ended December 31, 2020.

In terms of forward EV/S, VCRA’s 9.55x is 65.2% higher than the industry average of 5.78x. Moreover, its forward P/S of 9.72x is 37.7% higher than the industry average of 7.06x.

Analysts expect VCRA’s EPS to decline 32.1% year-over-year in the last completed quarter. The stock has lost 6.4% since hitting its 52-week high of $69.27 on December 22, 2021, to close last trading session at $64.84. Also, Wall Street analysts average price target for the stock is $61.38, which indicates a potential decline of 6.61%.

VCRA’s POWR Ratings reflect its poor prospects. The stock has a D grade for Value. We’ve also rated it for Growth, Momentum, Stability, Sentiment, and Quality. Click here to access all the VCRA ratings. VCRA is ranked #24 of 55 stocks in the Technology – Communication/Networking industry.

Impinj, Inc. (PI)

PI operates a cloud connectivity platform. Its platform, which comprises multiple product families, wirelessly connects individual items and delivers data about the connected things to business and consumer applications.

PI’s revenue came in at $45.19 million for the third quarter ended September 30, 2021, up 60.3% year-over-year. However, its total current assets came in at $163.06 million for the period ended September 30, 2021, compared to $171.36 million for the period ended December 31, 2020. Also, its total current liabilities came in at $107.22 million, compared to $27.59 million, for the same period.

In terms of forward EV/Sales, PI’s 11.65x is higher than the industry average of 4.22x by 175.9%. Also, its forward P/S of 11.72x is 183% higher than the industry average of 4.14x.

Analysts expect PI’s EPS to decline 79.6% in the second quarter of 2022. It has lost 6% since hitting its 52-week high of $94.39 on December 27, 2021, to close the last trading session at $88.70. Wall Street analysts average price target for the stock is $83, which indicates a potential decline of 7.11%.

PI’s POWR Ratings are consistent with this bleak outlook. The stock has a D grade for Stability, Value, Quality. We also have rated PI for Growth, Momentum, and Sentiment. Click here to access all of PI’s ratings. PI is ranked #85 of 99 stocks in the Semiconductor & Wireless Chip industry.


NOVT shares were trading at $174.92 per share on Monday afternoon, down $1.41 (-0.80%). Year-to-date, NOVT has gained 47.96%, versus a 28.96% rise in the benchmark S&P 500 index during the same period.


About the Author: Riddhima Chakraborty


Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...


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