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. On that note, here is one stock with the fundamentals to back up its performance and two best left ignored.
Two Momentum Stocks to Sell:
Udemy (UDMY)
1-Month Return: +15%
With courses ranging from investing to cooking to computer programming, Udemy (NASDAQ: UDMY) is an online learning platform that connects learners with expert instructors who specialize in a wide range of topics.
Why Does UDMY Give Us Pause?
- Customer spending has dipped by 1.8% on average as it focused on growing its buyers
- Estimated sales growth of 1% for the next 12 months implies demand will slow from its three-year trend
- Expensive marketing campaigns hurt its profitability and make us wonder what would happen if it let up on the gas
At $9.05 per share, Udemy trades at 18.4x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including UDMY in your portfolio.
Papa John's (PZZA)
1-Month Return: +22.6%
Founded by the eclectic John “Papa John” Schnatter, Papa John’s (NASDAQ: PZZA) is a globally recognized pizza delivery and carryout chain known for “better ingredients” and “better pizza”.
Why Are We Wary of PZZA?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
- Estimated sales growth of 1.9% for the next 12 months implies demand will slow from its five-year trend
- Free cash flow margin dropped by 3.8 percentage points over the last year, implying the company became more capital intensive as competition picked up
Papa John’s stock price of $47.36 implies a valuation ratio of 19.9x forward price-to-earnings. To fully understand why you should be careful with PZZA, check out our full research report (it’s free).
One Momentum Stock to Watch:
Anheuser-Busch (BUD)
1-Month Return: +25.7%
Born out of a complicated web of mergers and acquisitions, Anheuser-Busch InBev (NYSE: BUD) boasts a powerhouse beer portfolio of Budweiser, Stella Artois, Corona, and local favorites around the world.
Why Do We Like BUD?
- Customer loyalty and massive revenue base of $59.77 billion makes it a household name that influences purchasing decisions
- Unique products and pricing power are reflected in its top-tier gross margin of 54.6%
- Excellent operating margin of 24.9% highlights the efficiency of its business model, and its profits increased over the last year as it scaled
Anheuser-Busch is trading at $63.25 per share, or 8x forward EV-to-EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.
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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
