Great things are happening to the stocks in this article. They’re all outperforming the market over the last month because of positive catalysts such as a new product line, constructive news flow, or even a loyal Reddit fanbase.

But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. On that note, here are three overhyped stocks that may correct and some you should consider instead.

Tilly's (TLYS)

One-Month Return: +26.4%

With an emphasis on skate and surf culture, Tilly’s (NYSE: TLYS) is a specialty retailer that sells clothing, footwear, and accessories geared towards fashion-forward teens and young adults.

Why Do We Pass on TLYS?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
3. Negative earnings profile makes it challenging to secure favorable financing terms from lenders

Tilly’s stock price of $1.77 implies a valuation ratio of 0.1x forward price-to-sales. To fully understand why you should be careful with TLYS, check out our full research report (it’s free for active Edge members).

Sleep Number (SNBR)

One-Month Return: +52.8%

Known for mattresses that can be adjusted with regards to firmness, Sleep Number (NASDAQ: SNBR) manufactures and sells its own brand of bedding products such as mattresses, bed frames, and pillows.

Why Do We Avoid SNBR?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
2. Sales were less profitable over the last three years as its earnings per share fell by 51.4% annually, worse than its revenue declines
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

At $6.66 per share, Sleep Number trades at 2.1x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why SNBR doesn’t pass our bar.

Brookdale (BKD)

One-Month Return: +8.7%

With a network of over 650 communities serving approximately 59,000 residents across 41 states, Brookdale Senior Living (NYSE: BKD) operates senior living communities across the United States, offering independent living, assisted living, memory care, and continuing care retirement communities.

Why Does BKD Worry Us?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.6% annually over the last five years
2. Sales are projected to tank by 6.1% over the next 12 months as demand evaporates
3. 12× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

Brookdale is trading at $10.78 per share, or 5.3x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than BKD.

Stocks We Like More

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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