The stocks featured in this article are seeing some big returns. Over the past month, they’ve outpaced the market due to some combination of positive news, upbeat results, or supportive macro developments. As such, investors are taking notice and bidding up shares.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. Keeping that in mind, here is one stock with the fundamentals to back up its performance and two that may correct.
Two Momentum Stocks to Sell:
SoundHound AI (SOUN)
One-Month Return: +23%
Born from the idea that machines should understand human speech as naturally as people do, SoundHound AI (NASDAQ: SOUN) develops voice recognition and conversational intelligence technology that enables businesses to integrate voice assistants into their products and services.
Why Does SOUN Worry Us?
- Gross margin of 40.5% reflects its high servicing costs
- Operating margin declined by 43.6 percentage points over the last year as it scaled
- Negative free cash flow raises questions about the return timeline for its investments
SoundHound AI is trading at $13.09 per share, or 27.9x forward price-to-sales. Check out our free in-depth research report to learn more about why SOUN doesn’t pass our bar.
Affirm (AFRM)
One-Month Return: +18.3%
Founded by PayPal co-founder Max Levchin with a mission to create honest financial products, Affirm (NASDAQ: AFRM) provides a payment network that allows consumers to make purchases and pay for them over time with transparent, flexible installment loans.
Why Does AFRM Give Us Pause?
- Negative return on equity shows that some of its growth strategies have backfired
- 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $88.46 per share, Affirm trades at 37.5x forward P/E. Dive into our free research report to see why there are better opportunities than AFRM.
One Momentum Stock to Watch:
Dutch Bros (BROS)
One-Month Return: +22.9%
Started in 1992 by two brothers as a single pushcart, Dutch Bros (NYSE: BROS) is a dynamic coffee chain that’s captured the hearts of coffee enthusiasts across the United States.
Why Do We Watch BROS?
- Rapid rollout of new restaurants to capitalize on market opportunities makes sense given its strong same-store sales performance
- Same-store sales growth averaged 5.4% over the past two years, showing it’s bringing new and repeat diners into its restaurants
- Free cash flow margin jumped by 9.8 percentage points over the last year, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Dutch Bros’s stock price of $71.90 implies a valuation ratio of 102.5x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. 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-small-cap company Exlservice (+354% 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
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
