3 Hyped Up Stocks Facing Headwinds

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.

However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. All that said, here are three overhyped stocks that may correct and some you should consider instead.

Microchip Technology (MCHP)

One-Month Return: +54.2%

Spun out from General Instrument in 1987, Microchip Technology (NASDAQ: MCHP) is a leading provider of microcontrollers and integrated circuits used mainly in the automotive world, especially in electric vehicles and their charging devices.

Why Should You Dump MCHP?

1. Annual sales declines of 3.6% for the past five years show its products and services struggled to connect with the market during this cycle
2. Inability to adjust its cost structure while its revenue declined over the last five years led to a 11.6 percentage point drop in the company’s operating margin
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 16 percentage points

At $60.80 per share, Microchip Technology trades at 53.7x forward P/E. To fully understand why you should be careful with MCHP, check out our full research report (it’s free).

nLIGHT (LASR)

One-Month Return: +79.3%

Founded by a former CEO and Harvard-educated entrepreneur Scott Keeneyn, nLIGHT (NASDAQ:LASR) offers semiconductor and fiber lasers to the industrial, aerospace & defense, and medical sectors.

Why Do We Avoid LASR?

1. Sales tumbled by 5.8% annually over the last two years, showing market trends are working against its favor during this cycle
2. 5.7 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

nLIGHT’s stock price of $12.68 implies a valuation ratio of 2.8x forward price-to-sales. Dive into our free research report to see why there are better opportunities than LASR.

UFP Technologies (UFPT)

One-Month Return: +14.8%

With expertise dating back to 1963 in specialized materials and precision manufacturing, UFP Technologies (NASDAQ:UFPT) designs and manufactures custom solutions for medical devices, sterile packaging, and other highly engineered products for healthcare and industrial applications.

Why Are We Hesitant About UFPT?

1. Revenue base of $547.6 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
2. Free cash flow margin has shown no improvement over the last five years

UFP Technologies is trading at $241.89 per share, or 26.5x forward P/E. Check out our free in-depth research report to learn more about why UFPT doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio 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 176% over the last five years.

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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.