As the saying goes, the trend is your friend. High-momentum stocks can be profitable, often with higher short- and medium-term win rates. These momentum stocks will follow the broader market in the longer term, but if you are looking for juicy gains soon, these stocks can be very good bets.
Momentum stocks already have a well-established trend, and their bullish sentiment can drive these stocks higher and higher. And if the broader market is bullish, expect these stocks to supercharge your entire portfolio in a matter of weeks. However, size carefully. If any of these companies post guidance or results that disappointed Wall Street even a hair, the move to the downside could be quick and painful. These stocks can go down even if they perform well if the broader market becomes overly bearish. Investing in momentum stocks is akin to riding a wild bull.
With those risks in mind, let’s look at the following three momentum stocks that are up 500%. I’m taking a timescale of five years and a minimum of one year for that performance.
GigaCloud Technology (GCT)
I covered GigaCloud Technology (NASDAQ:GCT) in December last year and the momentum has continued. It sounds like a cloud and data technology company, but it actually provides end-to-end B2B e-commerce solutions for large parcel merchandise in the United States and internationally. It is impressive how fast this company is growing in this market. The services it provides are quite niche. E-commerce and shipping are saturated markets, but not many companies provide end-to-end solutions. The company has discovery, payments and logistics solutions on one platform.
GigaCloud’s sales grew a blistering 95% year-over-year in Q4, with margins expanding by 46%. Net income grew a whopping 185%. Moreover, the party is expected to continue with GigaCloud Technology’s expected to deliver o58% sales growth for 2024, and EPS expanding from $2.9 to $4.5 from 2024 to 2026. In my opinion, these numbers are truly mind-boggling. It is up 662% in the past year. Yet, you’re paying just 14 times forward earnings. Talk about a bargain!
Applied Optoelectronics (AAOI)
Applied Optoelectronics (NASDAQ:AAOI) is riskier than GigaCloud Technology, but it has a significant upside if it can bounce off its current correction due to a poor Q1 outlook. This company specializes in optical devices, packaged optical components, laser transmitters, fiber optic transceivers and HFC networking. The company’s growth hit a wall in 2017, with the stock struggling until it took off last year. It is down around 50% from its late-2023 peak and currently sits at $11.7, up 558% in the past year.
My bull case stems from the fact that there is light at the end of the tunnel for this company. Analysts expect one final year of losses in 2024 before it turns profitable in 2025. You’re paying around 13.4 times 2025 EPS right now.
The sales growth also looks impressive, with 32% expected this year and 50% for a modest premium next year. However, note that the earnings history of this company is not so clean. It beat EPS estimates in 13 of the past 16 quarters but missed revenue estimates in 10 of the past 16 quarters.
There is also a dilution problem here, with outstanding shares increasing 33% from 2022 to 2023, but should reduce significantly as the company turns profitable. As long as AAOI reaches positive margins next year with even 30% revenue growth, it should bounce higher. Plus, a lot of the bearishness is priced in.
FTAI Aviation (FTAI)
FTAI Aviation (NASDAQ:FTAI) is a company that sells and leases CFM56 engines, modules and materials. It also repairs aircraft engines. The business model has been very successful in a short amount of time. Even COVID did not hit this aerospace business too badly and has been soaring in the post-pandemic era.
Moreover, the CFM56 engine is the most popular type out there. Tens of thousands of these engines have been built, along with other similar varieties. FTAI also focuses on V2500 engines. Thus, this company sees a lot of business from commercial and private operators, especially since the aerospace industry boom after Trump’s tax cuts allowing jets to be written off as business expenses.
It missed its Q1 EPS estimates by a hair but beat revenue estimates by 7.1%. Analysts now expect a small decline to $1.9 in EPS for all of 2024, but the business shoukd bounce back quickly, with EPS expected at $3 in 2025 and $6 in 2027. Revenue is also expected to grow from $1.4 billion to $2.3 billion from 2024 to 2027. The premium you’re paying for this growth is still not very steep. FTAI Aviation seems to be in a sweet spot in the aerospace industry.
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.
