Just like many stocks outperform the market when its going up, those same stocks might under-perform the market when it is going down. Many smart shorts, knowing this, might pile into those high-beta names when they think the market is going down. Often this means nothing bad about the company, but simply that they want the high beta downside movement (Note that I am not making any mention whatsoever to the RTO space with this statement).
Your certainly correct that the market can get evaluations incorrect and go WAY too far to the upside. AMZN, NFLX, etc etc are examples. My simple point is that you can't claim the market 'gets it wrong and goes too far to the upside on certain names' and then claim there are not insane deals out there for people to pick up that are 'mispriced' by the market. Both sides of this coin exist and investors can benefit from both sides -- Just as both sides of this coin have their respective risks associated with them.
Often you will find these 'mispriced' names with companies that have convoluted corporate structures or weird accounting-rules that mask their true value from simple screening-searches and so forth.
-Fernando