Although it is always a good idea to monitor volume change and price resilience, some stocks — especially those categorized as overhyped stocks to sell when they reach new highs — have more fishy fundamentals than others, particularly if there is a possibility of a recession.

The global equity sell-off on Monday certainly hinted at a hard landing scenario. Citi (NYSE:C) economist Andrew Hollenhorst wisely noted that “Once you start to worry about [a] recession, you are usually in a recession.”

Despite interest rate cuts now more firmly on the table, with the first one at 68.5% probability in September, it will take a while for cheaper capital to bolster the equity market.

In the meantime, investors should reconsider their portfolio picks to see if any fit the overhyped stocks to sell bills.

Imax (IMAX)

Synonymous with premium movie experience, the Canadian IMAX (NYSE:IMAX) is a global brand across theater chains such as AMC (NYSE:AMC) and Cineworld. Through film licensing and proprietary deployment of an immersive audio/visual system, Imax’s fortunes rely on entertainment.

And therein lies the problem. Even before 2020’s lockdowns, there has been a noticeable trend of entertainment shifting from public to private. Social media, cheap large TVs, lower quality movies, high ticket prices, inflation, streaming services and degraded social cohesion all compound on declining movie attendance.

Although movies like “Deadpool & Wolverine” sometimes buck the trend, the overall trajectory is in decline. Compared to 2023, there were 11.47% fewer tickets sold in 2024. With the emergence of AI art, it is not difficult to see a further shift from public to private entertainment in the future, which would exclude Imax’s bottom line.

In July’s Q2 2024 earnings, Imax reported a 9% decline in revenue with a 57% decline in net income year-over-year, from $8.4 million to $3.6 million. With expectations low, Imax managed to beat the negative earnings per share (EPS) consensus of $0.02 at a positive $0.07 EPS.

With a 20% boost over the last 30 days, IMAX stock is now priced at $20.08. However, taking into account the aforementioned trends, it is more likely that the technically positive Q2 report will fail to keep the momentum. Likely reverting to the 52-week average of $16.90 or even lower makes IMAX one of the top overhyped stocks to sell. 

Fortinet (FTNT)

At a relative strength index (RSI) of 73, Fortinet (NASDAQ:FTNT) is likely overbought. Over the week, FTNT stock is up nearly 22%, going against the wider market grain. This is a result of positive Q2 earnings delivered on August 6th.

The cloud-based cybersecurity company reported 11% growth year-over-year to $1.43 billion and net income by 43% to $379.8 million. In contrast, Fortinet’s free cash flow decreased 27% year-over-year to $318.9 million.

This divergence is somewhat predictable as the company aims to become the leading Secure Access Service Edge (SASE) supplier, especially after the CrowdStrike (NASDAQ:CRWD) debacle.

However, a forward price-to-earnings ratio (P/E) of 38 is on the higher side in Fortinet’s uphill battle to tackle Palo Alto Networks (NASDAQ:PANW), Cisco (NASDAQ:CSCO) and others that bundle cybersecurity solutions on a single platform.

Moreover, in a more severe recession scenario, Cisco is likely to come on top as a firewall infrastructure provider for larger organizations. On the other hand, Fortinet caters more to small to medium-sized businesses (SMBs) that lack equivalent financial cushions.

Priced at $69.93, FTNT stock is above its 52-week average of $60.82, getting close to its all-time high of $80.28 per share. Investors should consider FTNT stock as a potential exit asset, with a caveat to keep Fortinet as an exposure candidate during the next major price correction.

Dropbox (DBX)

Dropbox (NASDAQ:DBX) cloud storage and file-sharing services priced in subscription tiers. However, one has to question if such a business model is ultimately sustainable.

Namely, if both Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Drive and Microsoft’s (NASDAQ:MSFT) One Drive can provide the same service as a way to entice users into their wider ecosystem of apps, how can Dropbox compete as a solo service without such an ecosystem?

Throughout 2024, financial figures appear to provide an answer. In Q1 earnings, Dropbox’s year-over-year revenue increased by only 3.3%, with a flatlined paying-user growth of 18.16 million compared to 17.90 million in the year-ago quarter.

Although the company’s net income increased from $69 million to $132.3 million, the company suffered user backlash during 2024. In addition to the security vulnerability to Dropbox Sign in April, the company will cease desktop support for older Windows versions as of October 22nd.

That is not a compelling move for a company in a vulnerable position. Year-to-date, DBX stock is down 26%. Priced at $21.68, DBX shares are under the 52-week average of $26.02 and close to its 52-week low point of $20.68 per share. Considering Dropbox fundamentals, this is a solid exit point for DBX as one of the overhyped stocks to sell.

On the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor held a long position in GOOG.