Wall Street pays close attention to the technology sector because technology companies typically offer investors significant returns. However, due to the volatility of this industry, technology stocks in particular can experience short-term price declines. This volatility is usually the result of macroeconomic factors, company-specific challenges, and market sentiment. Recently First Trust NASDAQ-100 Technology Sector Index Fund (NASDAQ:QTEC) recorded a decline of almost 4% in July and another 6% in August, but was still up 1.5% year-to-date.

When the general economic situation is a cause for concern, investors become increasingly wary of technology companies that have less than perfect growth rates. This earnings season, we are seeing significant share price declines for many technology companies. In most cases, they have not delivered strong results that justify high valuation multiples.

In this article, we will discuss three technology stocks that have recently entered a correction phase, each down more than 10% from their recent highs.

Confluent (CFLT)

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Our first stock is Converging (NASDAQ:CFLT), a player in the real-time data streaming space. Confluent offers two main products: Confluent Cloud, a managed cloud-native service, and Confluent Platform, a self-managed enterprise-grade software. These products make it easy to connect and process data in real time.

As of this writing, Confluent stock is trading for around $20.00. Yet the company has seen a significant decline in share price over the past few months. In the last month, for example, it has lost well over 20%. Similarly, CFLT shares have lost more than 13% year-to-date.

Confluent went public in June 2021 amid high expectations but has struggled to maintain its lofty valuations as market conditions have changed. Currently, the price-to-earnings (P/E) ratio for CFLT stock is over 87. Overall, valuation metrics are well above the industry average.

While Confluent continues to grow its customer base and revenue, growth has slowed compared to earlier phases of its public existence. This slowdown has made it difficult for the company to become profitable, with recent results showing a loss of nearly $90 million.

Confluent also competes with larger players such as Amazon (NASDAQ:Amazon) Amazon Web Services (AWS) and Microsoft (NASDAQ:MSFT) Azure, which offer their own real-time data streaming solutions. Although Confluent’s platform is specialized, the presence of such strong competitors raises concerns about the company’s ability to gain market share in the long term.

However, Wall Street remains bullish on CFLT shares, with a 12-month average price target of $31.00. Such an upside would represent a gain of well over 50%. However, we believe the current market sentiment for technology stocks like CFLT appears cautious due to concerns about competitive pressures and macroeconomic factors.

Pinterest (PINS)

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The social media platform Pinterest (NYSE:PINS) has also started a correction. The company is known for its visually driven search and discovery engine. At the end of June, PINS shares were trading above $45, now Pinterest stock price is around $29.

One of the main reasons for Pinterest’s share price decline is the slowdown in user growth. After a pandemic-led surge, the platform is struggling to retain its user base, especially in the US, its most lucrative market. There are concerns that Pinterest may have reached saturation in some areas, and its ability to reignite growth is uncertain. Following its latest quarterly results, management provided a lower-than-expected revenue outlook.

Pinterest is struggling not only with slowing user growth, but also with monetizing its platform effectively. Despite making progress in building its advertising capabilities, it still lags behind social media giants like Facebook and Instagram, both of which are owned by Meta-platforms (NASDAQ:META). In a tighter economic environment, advertisers remain cautious. And Pinterest has struggled to convince them that it can deliver the same return on investment as its larger competitors.

Additionally, the shift towards video content on social media platforms has not played into Pinterest’s hands. Currently, platforms like TikTok and Instagram continue to dominate the short-form video space. As a result, Pinterest’s relatively static content offering could be seen as less attractive to both users and advertisers.

Still, analysts are bullish on PINS stock for the long term, as reflected in a price target of $44.00. Such a move would imply a return of about 52%. As Pinterest continues to face numerous challenges, its ability to innovate in a competitive market will be critical to its long-term success.

Procore Technologies (PCOR)

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We conclude our discussion with Procore Technologies (NYSE:PCOR), a cloud-based construction management software company that went public in May 2021. As with many recent IPOs, particularly technology stocks, Procore’s stock initially rose sharply but has since entered a correction zone.

Since late July, PCOR shares have fallen by about 25%. A major factor behind this decline is the market’s shift away from high-growth, unprofitable technology companies. More and more investors are looking to invest their hard-earned money in more stable, profitable companies.

Procore has yet to achieve profitability, which has investors worried despite strong revenue growth. Its latest earnings report showed a narrowed net loss of $6.3 million, compared to $52.9 million a year ago. However, revenue guidance for the next quarter fell short of expectations, and slowing customer growth raised concerns about future prospects. In the current high-yield environment, unprofitable technology companies like Procore are particularly vulnerable as capital costs rise and investors become more risk-averse.

At the same time, the construction industry that Procore serves faces challenges such as economic cycles, rising material costs, labor shortages and supply chain disruptions. These factors can limit the ability of construction companies to invest in new software solutions like those provided by Procore.

Still, Wall Street believes the decline for Procore stock price should be over. Analysts currently expect PCOR stock to rise about 21% from current levels.

As of the publication date, Tezcan Gecgil had no position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s disclosure policies.

At the time of publication, the responsible editor had neither directly nor
indirectly) positions in the securities mentioned in this article.