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.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. All that said, here are three overhyped stocks that may correct and some you should consider instead.
C3.ai (AI)
One-Month Return: +20.7%
Founded in 2009 by enterprise software veteran Tom Seibel, C3.ai (NYSE: AI) provides software that makes it easy for organizations to add artificial intelligence technology to their applications.
Why Are We Wary of AI?
- Sales trends were unexciting over the last three years as its 15.5% annual growth was below the typical software company
- Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
- Persistent operating margin losses suggest the business manages its expenses poorly
C3.ai’s stock price of $29.18 implies a valuation ratio of 8.4x forward price-to-sales. To fully understand why you should be careful with AI, check out our full research report (it’s free).
Commercial Vehicle Group (CVGI)
One-Month Return: +45.9%
Formed from a partnership between two distinct companies, CVG (NASDAQ: CVGI) offers various components used in vehicles and systems used in warehouses.
Why Do We Pass on CVGI?
- Annual sales declines of 2.8% for the past five years show its products and services struggled to connect with the market during this cycle
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $1.97 per share, Commercial Vehicle Group trades at 14x forward P/E. If you’re considering CVGI for your portfolio, see our FREE research report to learn more.
AMC Entertainment (AMC)
One-Month Return: +16%
With a profile that was raised due to meme stock mania beginning in 2021, AMC Entertainment (NYSE: AMC) operates movie theaters primarily in the US and Europe.
Why Are We Hesitant About AMC?
- Annual revenue declines of 2.7% over the last five years indicate problems with its market positioning
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
AMC Entertainment is trading at $3.48 per share, or 2.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why AMC doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
Trump’s April 2024 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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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