3 Overrated Stocks Walking a Fine Line

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?

1. Sales trends were unexciting over the last three years as its 15.5% annual growth was below the typical software company
2. Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
3. 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?

1. 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
2. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
3. 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?

1. Annual revenue declines of 2.7% over the last five years indicate problems with its market positioning
2. Cash burn makes us question whether it can achieve sustainable long-term growth
3. 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).

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