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Investors are certainly finding no shortage of stock darlings in which to invest right now. However, the list of such hyper-growth stocks has changed quite a bit in recent years. In other words, the stock darlings of 2020 and 2021 are not necessarily today’s winners.

The three companies on this list of stock darlings to consider diversifying away from have mixed outlooks and recent performance. Some have performed relatively well of late, and others are already seeing fundamentals deteriorate. But each of these three stock darlings are similar in the sense that I think the outlook over the next five years or so will likely be increasingly challenging for these companies.

Here are three such stocks I think investors may want to steer clear of right now.

Netflix (NFLX)

After seeing considerable share price appreciation over the past year, Netflix (NASDAQ:NFLX) shares are starting to appear pricey to some investors. With a trailing price-earnings (P/E) multiple around 46-times, Netflix is certainly pricing in a considerable amount of growth.

However, with so much cost cutting already haven taken place, and the likely need to spend more on content moving forward, margin pressures may materialize. And that could derail the company’s recent earnings growth and high return on equity that Netflix has seen relative to its peers.

Despite slightly stable financials, Netflix will cease reporting subscriber numbers by Q1 of 2025, signaling a shift towards service optimization over subscriber count. This strategic change aims for long-term profitability but may initially slow subscriber growth and impact stock value.  Additionally, Netflix has opted not to issue regular dividends, directing all profits back into business reinvestment, driving its impressive earnings growth.

Nevertheless, the company’s multiple in combination with its cash flow uncertainty make this a stock that’s worth waiting on right now. If NFLX stock drops low enough, I think it could be a buy. But at this valuation, I’m skeptical.

Micron Technology (MU)

Profiting from artificial intelligence (AI) hardware trends, Micron Technology (NASDAQ:MU) is an AI stock that most people think complements to other AI chips like Nvidia (NASDAQ:NVDA). MU anticipates robust demand for high-bandwidth memory amid Samsung’s chip issues, boosting its capital expenditure by 6.7% to $8 billion. 

The memory market’s volatile history once featured fierce competition among numerous players. Over time, consolidation reduced rivals, fostering hopes of stable profitability for memory firms. However, these hopes were dashed when demand for computers and smartphones declined in 2023, adversely affecting MU’s finances. 

Further, analysts project a return to breakeven this year, yet challenges persist with Micron Technology’s shares trading at over 150-times forward earnings. While AI has been highlighted as a growth driver for the company, its contribution remains modest within Micron Technology’s broader business landscape. I believe MU stock is highly overvalued right now due in large part to its 78% increase in stock price last year. 

Tesla (TSLA)

Seeing a 28% decline in the first half of 2024, Tesla (NASDAQ:TSLA) is only proving its stock price can’t really be justified.

Trading $196 per share and a market cap of $589 billion, Tesla’s momentum is clearly to the downside. With more car buyers turning their attention to hybrids and lower-cost EVs, Tesla’s demand profile has shifted considerably. Importantly, the company’s price cutting measures have done little to stimulate demand, with an excessive amount of inventory now building up on lots across the company.

In March, hedge fund manager Per Lekander warned in a CNBC article that Tesla might go as low as $14 and could go bankrupt. Lekander gave these words after Tesla’s disappointing Q1 results, especially its lower-than-expected deliveries. 

Lekander’s pessimistic outlook on Tesla extended to predicting a potential drop in its stock price to $14 per share. He also thinks the forecast for Tesla’s earnings will go down to $1.40 per share per year, showing slow growth. Lekander thinks Tesla’s valuation should be based on 10x earnings.

Aside from the numbers, Tesla is struggling with its sales as other EV companies are providing more affordable alternatives to its models. I think Tesla stands to be among the biggest laggards in the mega-cap tech space for some time. There are just so many better high growth options out there. Put simply, Tesla isn’t the growth stock it once was.

On the date of publication, Chris MacDonald did not hold (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.