3 Growth Stocks Wall Street Analysts Think Are Overpriced

Many growth stocks have been flying high over the past year, thanks in large part to the growing excitement around artificial intelligence, crypto, and tech in general. But that means prices are high and buying stocks near or at their peaks could mean investors have to wait a long time to earn a good return -- or worse, they could incur significant losses.

According to Wall Street analysts, three stocks that look overpriced today include Palantir Technologies (NYSE: PLTR) , Marathon Digital (NASDAQ: MARA) , and Carvana (NYSE: CVNA) . Here's a look at how much analysts believe they could fall and why they should be avoided right now.

Palantir Technologies: 26% downside risk

The consensus analyst price target for Palantir Technologies is $21.32 per share. Based on its current share price of $28.81, the stock could fall 26% over the next 12 months.

Palantir has been a big name in artificial intelligence (AI), and its analytics software utilizes the technology to create more efficiencies and opportunities for its customers. It has even used AI boot camps to help get customers excited about the potential for AI in their businesses. But while Palantir has been growing its business, analysts seem to expect more from a tech stock that trades at 87 times forward earnings estimates.

In the first quarter, the company's revenue grew 21% year over year to $634 million. That's only a slight acceleration from the 20% growth it recorded at the end of last year. While Palantir's growth has accelerated, it hasn't taken off like other AI stocks , and there are concerns its results aren't living up to the hype. And until they do, investors may want to avoid paying the massive premium necessary to own Palantir.

Marathon Digital: 9% downside risk

Bitcoin mining company Marathon Digital has a consensus analyst price target of just $19.61, which suggests the stock could slide 9% based on where it trades as of this writing (and that's on top of its single-day loss of nearly 10% on July 23). The Bitcoin halving event earlier this year has cut the reward for mining Bitcoin (in half), putting pressure on mining companies to ramp up production. This is especially important since the cryptocurrency's value hasn't soared since the halving took place.

Impairment charges and volatility in earnings are par for the course for crypto mining stocks, and Marathon is no exception. The company has been doing well in recent quarters, posting a profit in three of the past four periods, but that's largely been due to gains on digital assets. The unpredictability of the company's earnings numbers makes Marathon a risky buy to hang on to.

Unless you have a high risk tolerance and are extremely bullish on Bitcoin and its ability to rise a whole lot higher, the uncertainty around Marathon's business is too much for most investors.

Carvana: 22% downside risk

According to analysts, Carvana stock could fall to just $100.93 per share. That represents a 22% decline for the online used-car dealer in the short term.

The company struggled due to weakening demand for used cars in 2022, but it has rebounded in a big way this year with its share price up 144% year to date. However, there is a lot of bullishness priced into its current valuation, despite looming challenges for the used car industry .

And the business still has a long way to go before proving it can achieve consistent profitability. In three of the past five quarters, Carvana has incurred a net loss -- and twice it was in excess of $100 million. Carvana is a speculative buy at best and while it may be riding the bull market this year, investors may want to temper their expectations for the future given its underwhelming financials.

Price targets can and will change

Price targets can give investors an idea of how Wall Street feels about a stock, but they represent just one data point, and price targets change frequently due to analysts' short-term focus. It's important for investors to do their own research and avoid basing their investment decisions on analyst ratings alone.

For the companies listed above, analysts' low price targets can clue you into the challenges and doubts around their core businesses, presenting a valuable starting point to make your own case for each stock.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Palantir Technologies. The Motley Fool has a disclosure policy .