The markets have been doing very badly over the past few weeks. In just a month, the Dow Jones has declined 8% while the NASDAQ has dropped 3% in value. But the losses haven’t all been equitable, as some stocks have seen bigger sell-offs than others.
Amazon.com, Inc. (NASDAQ:AMZN) has seen its share price drop significantly over the past month, losing as much as 23% and hitting under $1,600 a share, the lowest it’s been since April of this year. Another stock that has lost heavily in value is Netflix, Inc. (NASDAQ:NFLX) which is down more than 25%. Microsoft Corporation (NASDAQ:MSFT), meanwhile, has declined by only 10%.
The one concerning trend I see here for Amazon investors is that the most extreme sell-offs are happening on expensive and overvalued stocks that are trading at very high premiums. Modestly-priced Apple Inc (NASDAQ:AAPL) stock has declined just 7% during this time.
Stocks like Amazon and Netflix have been trading at obscene multiples to earnings for a long time now, and amid some timid earnings results, investors might finally be second guessing whether or not these companies can truly keep up their previous growth rates and if the markets are overdue for a correction.
With interest rates on the rise, trade concerns raising issues, there could be many factors that slow down the economy, and stocks that are primed for corrections will be those that are already overvalued. Even if we do see a bounce back in the coming days or weeks, investors should heed this as a warning that these stocks can’t keep rising forever.
