Five Overvalued Stocks to Sell Before 2026's Market Correction

, according to RBC Wealth Management. This valuation expansion, driven by optimism around AI-driven productivity and a resilient macroeconomic environment, has created a market where growth expectations often outpace fundamentals. While the "Magnificent 7" have been the primary engines of this rally, their valuations now reflect a stark disconnect between price multiples and earnings growth. Below, we analyze five stocks from this group that exhibit unsustainable valuation-growth mismatches, warranting caution ahead of a potential 2026 correction.

1. Tesla (TSLA): A P/E of 183.26 vs. 13.7% Expected Earnings Growth

as of July 2025 is the highest among the Magnificent 7, according to Alaric Securities. , far exceeding the 1.0 threshold typically considered "fairly valued." suggest short-term momentum, the company's long-term profitability remains unproven. A slowdown in EV demand or margin compression could trigger a sharp re-rating.

2. Apple (AAPL): A P/E of 29.69 vs. 7.62% Expected Earnings Growth

according to Alaric Securities appears reasonable at first glance, according to Alaric Securities , signaling overvaluation. The company's reliance on a shrinking iPhone upgrade cycle and a saturated premium services market raises concerns about sustaining growth. While Apple's ecosystem and brand loyalty remain strong, its ability to replicate the explosive innovation of past decades is questionable. Investors may soon demand a lower multiple as growth decelerates.

3. Microsoft (MSFT): A P/E of 38.29 vs. 14.9% Expected Earnings Growth

according to Alaric Securities according to Alaric Securities , still elevated despite its leadership in cloud computing and AI infrastructure. according to Charles Stanley is impressive, the company's valuation assumes perpetual dominance in a sector increasingly competitive with Amazon and Google. A moderation in cloud spending or regulatory headwinds could pressure multiples.

4. Amazon (AMZN): A P/E of 37.09 vs. 12%+ Expected Earnings Growth

according to Alaric Securities , according to Forbes). , suggesting overvaluation. according to Charles Stanley for AI and cloud infrastructure is ambitious, but its ability to convert this spending into sustainable margins remains untested.

5. Meta (META): A P/E of 27.69 vs. 10–12% Expected Earnings Growth

according to Alaric Securities based on Q2 2025 performance . highlights short-term strength, its long-term growth depends on the success of the metaverse and AI-driven ad platforms-both of which face significant technical and market hurdles. A slowdown in user engagement or regulatory scrutiny could trigger a re-rating.

The Case for Selling Before 2026

according to ACH Invest, but their valuations now reflect a market that assumes perpetual growth. As noted by a report from Alaric Securities, "multiple expansion has outpaced earnings revisions, creating a fragile equilibrium" according to Alaric Securities. according to Alaric Securities-a level historically associated with lower long-term returns according to LSEG-investors should prioritize quality over momentum. Selling overvalued names like Tesla, Apple, Microsoft, Amazon, and Meta before 2026 could mitigate downside risk as earnings growth normalizes and discount rates adjust.