These 2 Stocks Might Be Getting a Little Too Expensive

As the TSX Composite Index recovers from fear of interest rate hikes, tech and oil stocks made a high, making them too expensive to buy.

| More on:

The markets have been range-bound throughout the year as the aggressive interest rate hike by the central bank slowed economic growth. Many companies and individuals felt the impact of higher interest rates as their debt became expensive. However, a few companies benefitted from the cyclical upturn and demand recovery. But given the slowdown in economic growth, their stock prices might be a little too expensive. Their current growth could reverse if the economy falls into a recession. 

Two stocks that are a little too expensive 

Oil and tech stocks surged to levels at which they have become too expensive to buy. Instead of buying these stocks at their highs, you could consider selling them and making a profit.  

Crescent Point Energy stock

Oil stocks have had a gala time since the Russia-Ukraine war altered the supply chain for the long term. And now Saudi Arabia and Russia are keeping oil supply tight to keep prices elevated in the US$80–US$100 range. Crescent Point Energy (TSX:CPG) is benefitting from this upcycle. 

However, oil is a decelerating energy source as major developed economies push for green energy alternatives to reduce carbon emissions. The International Energy Agency expects oil consumption in transportation fuels to decline after 2026 thanks to the increasing adoption of electric vehicles and biofuels.

Even at its 52-week high, Crescent Point Energy’s stock price trades 75% below the 2014 levels of over $45 because of the oil crisis. This shows the decelerating nature of oil stocks. Crescent Point stock is unlikely to reach its post-pandemic high of over $13 as it is priced at US$125 oil per barrel. CPG is a cyclical stock whose upper limit is limited. 

Investors would be better to avoid buying Crescent Point stock at current prices, even for dividends. Management could cut dividends if oil prices fall significantly. A recession could pull down oil prices rapidly with no recovery to its current levels until another supply shock. 

BlackBerry stock

BlackBerry (TSX:BB) stock is trading on the upper side of its $4.5–$8 range. The cybersecurity company has several headwinds before its ultimate tailwinds of autonomous cars, artificial intelligence-led security, and the Internet of Things (IoT) unfurls. The IOT software maker is seeing delays in government cybersecurity contracts, which is hurting its revenue. The company even reduced its second-quarter cybersecurity revenue to $80 million. 

BlackBerryQ2 FY23Q3 FY23Q4 FY 23Q1 FY24Q2 FY24
Cybersecurity Revenue (million)$111$106$88$93$80
IoT Revenue (million)$51$51$53$45$49
BlackBerry’s revenue from cybersecurity and IoT

And with the economic slowdown, car sales would remain weak, delaying the realization of the pending QNX royalty of $640 million. Despite these headwinds, BlackBerry has the potential to turn around because of its technology, which is trusted by governments worldwide. 

However, the stock is overvalued for the current economic conditions. It is trading at 4 times its sales per share despite declining revenue. The high share price comes as BlackBerry has reportedly received an acquisition offer from Veritas Capital, which acquires technology firms catering to governments, especially national security. If the acquisition news is true, BlackBerry stock’s upside will be limited to the price the acquirer offers. 

BlackBerry did hire investment bankers to look for opportunities to unlock value. But an acquisition was unexpected. If the acquisition news is false or the deal is cancelled BlackBerry stock could fall significantly. That would be a good entry point to invest in BlackBerry. 

Investing tip

The above two stocks are trading closer to their highs, which may not be sustainable in a weak economy. Instead of buying them while they are expensive, you could shift your focus to value stocks with long-term growth potential, trading near their lows due to short-term headwinds. 

In a volatile market, BCE stock is a buy at the dip as you can lock in a higher dividend yield of 6.99%. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy

More on Tech Stocks

Person uses a tablet in a blurred warehouse as background
Tech Stocks

2 Canadian AI Stocks Poised for Significant Gains

Here are two top AI stocks long-term investors may want to consider before the end of the year.

Read more »

woman looks at iPhone
Dividend Stocks

Retirees: Is TELUS Stock a Risky Buy?

TELUS stock has long been a strong dividend provider, but what should investors consider now after recent earnings?

Read more »

Car, EV, electric vehicle
Tech Stocks

Better Electric Vehicle (EV) Stock: Magna International vs. Rivian

Rivian (NASDAQ:RIVN) is growing quickly, but Magna International (TSX:MG) is more profitable.

Read more »

Canadian Dollars bills
Tech Stocks

Invest $30,000 in 2 TSX Stocks, Create $9,265.20 in Passive Income

If you're only going to invest in two TSX stocks, invest in these top choices that have billionaires backing them…

Read more »

Start line on the highway
Tech Stocks

3 Beginner-Friendly Stocks Perfect for Canadians Starting Out Now

Are you new to investing in the stock market? Here are three Canadian companies that are perfect to get you…

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

Step Aside, BlackBerry: This AI Stock Is the Real Deal for Canadian Investors

Down 60% since 2016, BlackBerry stock remains a high-risk investment for investors due to its tepid sales and negative profit…

Read more »

cryptocurrency, crypto, blockchain
Tech Stocks

2 Stocks to Hold Instead of Bitcoin in 2025

Investors with a high-risk appetite can consider increasing exposure to stocks such as MicroStrategy and Coinbase to benefit from the…

Read more »

Asset Management
Dividend Stocks

3 Safe Canadian Stocks to Buy Now and Hold During Market Volatility

These Canadian stocks offer the perfect trio for investors looking for growth, income, and long-term holds.

Read more »