Few investments can match the profit potential of momentum stocks. They capture the market’s attention and get swept up in a wave of hype that sends their share prices skyrocketing—the fear of missing out kicks in, fueling further buying that validates the momentum trade. Before you know it, these stocks have doubled, tripled, or even quintupled within months.
Of course, fundamentals still matter. But with momentum stocks, excitement and hype can override traditional valuation metrics and take prices to dizzying new heights. Combining strong fundamentals with powerful momentum gives you a winning recipe that can deliver triple-digit returns in no time.
That said, momentum cuts both ways. These stocks can fall just as fast as they rise when the music stops. A broader market correction, early investors taking profits, or a shift in sentiment could all trigger a painful pullback. So timing and risk management are critical when trading momentum stocks. Still, if entered at the right point with a smart exit plan, they offer some of the best profit potential out there. Let’s take a look!
GigaCloud Technology (GCT)
I first wrote about GigaCloud Technology (NASDAQ:GCT) back in mid-December, and this stock has delivered well over 150% gains since then. There is still a lot of fuel left in the tank here, and I believe the momentum will likely carry it higher in the coming months. Let’s look at what GigaCloud does for those unfamiliar with the company, as the name can be misleading. In simple terms, GigaCloud is a B2B e-commerce and logistics company. It offers competitive ocean freight, warehousing and fulfillment services powered by advanced technology and AI.
GCT is seeing explosive growth with some of the best financials in the market, so the current growth in its stock price is more organic than hype-driven. The company had stellar Q4 results. Revenue was up 95% to $245 million and net income was 185% to $36 million. It beat top-line estimates by 9.2% and EPS estimates by 50%. Regardless, it is still cheap at just 13 times forward earnings. We are also looking at EPS surging from $2.9 to $4.5 from 2024 to 2026, along with revenue growing from $1.1 billion to $1.6 billion in the same timeframe. This stock can definitely double from here and still have attractive valuations. It is up 325% in the past six months alone.
In my view, GCT has a long growth runway ahead. The global logistics industry is worth over $10 trillion and growing rapidly as e-commerce expands.
AppLovin (APP)
AppLovin (NASDAQ:APP) is a technology company that provides end-to-end software and AI solutions. It mostly engages in marketing for mobile apps. Their platform enables developers to market, monetize, analyze and publish their apps. The software industry is booming, and with AI entering the space, many software companies are seeing their valuations balloon, with many trading at 10-20 times forward sales due to their high margins.
AppLovin has also seen a significant appreciation in value and currently trades at 6 times forward sales, but I believe it can easily double over the coming months if the momentum keeps strong. EPS is expected to rise from $2.5 to $4 from 2024 to 2026. The business is growing at a 28% CAGR and is expected to reach $4.1 billion in sales in 2024. The stock is up 310% in the past year.
ACM Research (ACMR)
ACM Research (NASDAQ:ACMR) develops advanced wafer cleaning and wet processing technologies for the semiconductor industry. Their portfolio includes IC and compound semi-manufacturing tools, wafer-level packaging and wafer manufacturing. They offer solutions for single-wafer and batch wet cleaning, electroplating, thermal deposition, stress-free polishing, PECVD and tracking.
The semiconductor industry is booming, and the megatrends driving this company’s momentum are clear. ACMR has already delivered triple-digit returns since my first buy rating on the stock in June. Analysts expect huge growth, with revenue doubling in the next four years. Since 2020, the company has surpassed all but one quarterly earnings estimate and only missed the revenue mark three times (by less than $1 million).
In addition, Gurufocus also expects the stock to double by the end of 2026, though momentum could drive it much higher. Its 3-year EPS growth (minus non-recurring items) sits at 119%, better than 96% of peers.
On the date of publication, Omor Ibne Ehsan 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.