Take the Money and Run: 3 Overbought Stocks to Sell ASAP
Generally, the idea of selling securities rankles the public’s nerve, yet trimming overbought stocks is just as important a discipline as knowing what to buy. It might be even more important than the latter concept.
Imagine you’re a professional baseball team. You’re charged with bringing home a title to your hometown’s favorite ballclub. Fortunately, you have a tremendous starting pitching lineup. Unfortunately – as the Los Angeles Dodgers have found out – you need relief pitching to close out games. Otherwise, you’d be throwing away W’s and replacing them (needlessly) with L’s.
That’s the narrative behind overbought stocks. You got in early. That’s awesome. Now, close out the game before all that good work goes for naught.
Coupang (CPNG)
Based in South Korea, Coupang (NYSE:CPNG) owns and operates retail businesses through its mobile applications and Internet websites. Its online marketplace offers a variety of product categories, from sporting goods to consumer electronics to even fresh food and groceries. Commanding a stronghold in the South Korean market, Coupang naturally attracted speculative interest when it succumbed to a multi-month low this past February.
However, shares may have gone too far, too fast. On a year-to-date basis, CPNG stock returned over 43%. At time of writing, its relative strength indicator clocks in at over 84 points. The cutoff for when a security is considered overbought is 70. So, from a technical standpoint, investors may want to consider trimming their exposure.
On a financial note, CPNG stock trades at 1.66X trailing-year revenue. That’s above the sector median value of 0.67X. To be fair, analysts project revenue of $29.17 billion for the current fiscal year. That’s up 19.6% from 2023’s sales haul of $24.38 billion.
Nevertheless, even at the most optimistic revenue forecast of $31.4 billion, Coupang would trade at a sales multiple of 1.15X. So, it’s one of the overbought stocks to trim.
Argan (AGX)
Operating under the industrials sector, Argan (NYSE:AGX) specializes in the engineering and construction field. Through its subsidiaries, the company provides engineering, procurement, construction, commissioning, maintenance, project development and technical consulting services to the power generation market. Given its relevance to the green and renewable energy space, it’s no shock that AGX stock benefited from upside momentum.
However, it’s also possible that, as with Coupang above, shares have gone too far, too fast. Since the beginning of the year, AGX stock gained almost 30% of equity value. Most of this upside came in the last five sessions, which saw Argan swing up 22%. Right now, its RSI reads 80.75 points. Technically speaking, that makes it one of the overbought stocks.
Financially, the issue comes with the rich sales multiple of 1.44X. In contrast, the sector median value sits at 0.76X. To be fair, analysts anticipate that by the end of the current fiscal year (2025), Argan will post sales of $724.35 million. That’s up 26.3% from last year’s tally of $573.33 million.
Still, even at the most optimistic forecast of $737.7 million, AGX stock would trade at a revenue multiple of around 1.1X.
Janux Therapeutics (JANX)
A biotechnology specialist, Janux Therapeutics (NASDAQ:JANX) is a clinical-stage enterprise focused on the development of immunotherapies. These encompass unique platforms that leverage advanced tech to treat patients suffering from cancer. One of its core products addressing metastatic castration-resistant prostate cancer is currently in Phase 1 trials.
Despite the extraordinary relevancies that Janux offers, the bulk of the optimism may have been priced in. Notably, in the past five sessions, JANX stock already gained almost 28% of market value. Since the start of the year, shares have skyrocketed nearly 359%. Part of the enthusiasm may be attributed to high short interest (20.17% of the float) against JANX.
Basically, a rising price can easily panic bears out of their position. Still, one has to question if there’s more legs left. Even though the RSI dipped to 72.59 points, it’s still considered one of the overbought stocks.
Here’s the deal: JANX stock now trades at nearly 278X trailing-year revenue. The problem is that even at the highest revenue target of $5 million by the end of fiscal 2024, it’s still below the $8.08 million posted last year. Thus, taking some profits might not be a bad idea.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
