Exciting developments are taking place for the stocks in this article. They’ve all surged ahead of the broader market over the last month as catalysts such as new products and positive media coverage have propelled their returns.

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.

nCino (NCNO)

One-Month Return: +16.8%

Born from the internal technology needs of a community bank in 2011, nCino (NASDAQ: NCNO) provides cloud-based software that helps financial institutions streamline client onboarding, loan origination, and account opening processes.

Why Do We Think Twice About NCNO?

1. 19.1% annual revenue growth over the last three years was slower than its software peers
2. Estimated sales growth of 5.7% for the next 12 months implies demand will slow from its three-year trend
3. Gross margin of 60.2% reflects its relatively high servicing costs

nCino’s stock price of $30.59 implies a valuation ratio of 5.8x forward price-to-sales. If you’re considering NCNO for your portfolio, see our FREE research report to learn more.

Petco (WOOF)

One-Month Return: +14.7%

Historically known for its window displays of pets for sale or adoption, Petco (NASDAQ: WOOF) is a specialty retailer of pet food and supplies as well as a provider of services such as wellness checks and grooming.

Why Do We Pass on WOOF?

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. Earnings per share have contracted by 33.8% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
3. 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

At $3.67 per share, Petco trades at 19.8x forward P/E. Read our free research report to see why you should think twice about including WOOF in your portfolio.

Funko (FNKO)

One-Month Return: +19.6%

Boasting partnerships with media franchises like Marvel and One Piece, Funko (NASDAQ: FNKO) is a company specializing in creating and distributing licensed pop culture collectibles.

Why Do We Think FNKO Will Underperform?

1. Products and services aren't resonating with the market as its revenue declined by 9.7% annually over the last two years
2. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

Funko is trading at $3.34 per share, or 16.2x forward P/E. To fully understand why you should be careful with FNKO, check out our full research report (it’s free).

Stocks We Like More

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out 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 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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