Due to continuing digitization worldwide, experts predict that tech trends should dominate the market next year. Furthermore, as companies across industries invest significantly in technology upgrades, the tech industry should continue to thrive.

Continuing advancements in the tech space should further propel the industry’s growth. Investors’ interest in the technology industry is evident in the iShares Global Tech ETF’s (IXN) 32.6% returns over the past year versus the SPDR S&P 500 ETF Trust’s (SPY) 27.3% gains.

But although the industry has been one of the top-performing industries this year, not all tech stocks are expected to continue advancing in price Snowflake Inc. (SNOW), Cloudflare, Inc. (NET), and MongoDB, Inc. (MDB) are currently trading at price levels that are not consistent with their weak growth prospects. So, we think it could be wise to avoid these overvalued stocks now.

Snowflake Inc. (SNOW)

Incorporated in 2012, SNOW is a San Mateo, Calif.-based cloud data platform provider that serves in the United States and internationally. The company’s platform offers Data Cloud, which enables customers to consolidate data to drive meaningful business insights, build data-driven applications, and share data. SNOW also provides financial services, healthcare and  life sciences, and other public services.

SNOW’s revenues increased 109.5% year-over-year to $334.44 million in its fiscal third quarter, ended October 31, 2021. However, the company’s total operating expenses grew 41.4% from their year-ago value to $370.93 million. Its operating loss came in at $157.27 million. Also, the company’s net loss amounted to $154.86 million during the period.

SNOW’s EPS is expected to decrease marginally per annum in the next five years. The stock has declined  8.5% in price over the past month.

In terms of forward Price/Sales, SNOW is currently trading at 91.33x, 2137.2% higher than the 4.08x industry average. In addition, its 23.31x forward Price/Book is 300.2% higher than the 5.82x industry average.

SNOW’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

Also, the stock has an F grade for Value and a D grade for Stability and Quality. We have also graded SNOW for Growth, Momentum, and Sentiment. Click here to access all of SNOW’s ratings. SNOW is ranked #61 of the 75 stocks in the D-rated Technology – Services industry.

Click here to check out our Cloud Computing Industry Report for 2021

Cloudflare, Inc. (NET)

NET is a cloud service provider that delivers a range of network services to businesses worldwide.  The San Francisco-based company provides an integrated cloud-based security solution, including software-as-a-service applications. Application Security and Application Performance are the company’s product categories.

During the third quarter, ended September 30, 2021, NET’s revenue increased 51% year-over-year to $172.35 million. However, the company’s total operating expenses grew 48.8% from their year-ago value to $161.32 million. Its loss from operations rose 24.7% from the prior-year quarter to $26.49 million. Also, the company’s net loss increased 305.5% year-over-year to $107.34 million.

NET’s EPS is estimated to remain negative in the current year. The stock has declined  32.7% in price over the past month.

In terms of forward EV/Sales, NET is currently trading at 64.79x, which is 1520.3% higher than the 4.0x industry average. In addition, its 731.86x forward EV/EBITDA is 4586.7% higher than the 15.67x industry average.

NET’s poor prospects are also apparent in its POWR Ratings. The stock has an overall D rating, which equates to Sell in our proprietary rating system. Also, the stock has an F grade for Value and a D grade for Stability.

In addition to the POWR Rating grades I have just highlighted, one can see NET’s ratings for Sentiment, Growth, Quality, and Momentum here. NET is ranked #24 of 27 stocks in the D-rated Software – Security industry.

Click here to checkout our Cybersecurity Industry Report for 2021

MongoDB, Inc. (MDB)

New York City-based MDB is a database platform that offers MongoDB Enterprise Advanced and MongoDB Atlas to provide multi-cloud databases and other cloud solutions. The company’s other products include Community Server, a free-to-download version of its database. MDB also offers professional services to its customers, including consulting and training.

For the third quarter, ended September 30, 2021, MDB’s total revenue increased 50.5% year-over-year to $226.89 million. The company’s total operating expenses grew 44.5% from their year-ago value to $235.2 million. Its loss from operations rose 32.2% from the prior-year quarter to $76.77 million. Also, the company’s net loss increased 11.9% year-over-year to $81.29 million.

MDB’s EPS is expected to decline 13.3% next quarter. The stock has declined 19.5% in price over the past month.

In terms of forward Price/Book, MDB is currently trading at 52.3x, which is 797.9% higher than the 5.82x industry average. In addition, in terms of forward Price/Sales, MDB is currently trading at 40x, which is 879.8% higher than the 4.08x industry average.

It is no surprise that MDB has an overall D rating, which equates to a Sell in our POWR Rating system. Also, the stock has an F grade for Value and a D grade for Stability.

Click here to see the additional POWR Ratings for MDB (Momentum, Growth, Sentiment, and Quality). MDB is ranked #109 of 168 stocks in the F-rated Software – Application industry.

Click here to check out our Software Industry Report for 2021

SNOW shares were trading at $329.36 per share on Thursday afternoon, down $30.98 (-8.60%). Year-to-date, SNOW has gained 17.04%, versus a 26.60% rise in the benchmark S&P 500 index during the same period.

About the Author: Priyanka Mandal

Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...

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