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.

But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. On that note, here is one stock we think lives up to the hype and two not so much.

Two Momentum Stocks to Sell:

Petco (WOOF)

One-Month Return: +25.5%

Historically known for its window displays of pets for sale or adoption, Petco (NASDAQ:WOOF) is a specialty retailer of pet food and supplies as well as a provider of services such as wellness checks and grooming.

Why Does WOOF Worry Us?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
2. Suboptimal cost structure is highlighted by its history of operating losses
3. High net-debt-to-EBITDA ratio of 8× could force the company to raise capital at unfavorable terms if market conditions deteriorate

At $3.10 per share, Petco trades at 50.6x forward price-to-earnings. Check out our free in-depth research report to learn more about why WOOF doesn’t pass our bar.

Lovesac (LOVE)

One-Month Return: +16.3%

Known for its oversized, premium beanbags, Lovesac (NASDAQ:LOVE) is a specialty furniture brand selling modular furniture.

Why Are We Wary of LOVE?

1. Lackluster 2.2% annual revenue growth over the last two years indicates the company is losing ground to competitors
2. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 1.5 percentage points
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Lovesac’s stock price of $21.01 implies a valuation ratio of 44x forward price-to-earnings. To fully understand why you should be careful with LOVE, check out our full research report (it’s free).

One Momentum Stock to Watch:

Alignment Healthcare (ALHC)

One-Month Return: -0.7%

Founded in 2013 with a mission to transform healthcare for seniors, Alignment Healthcare (NASDAQ:ALHC) provides Medicare Advantage health plans for seniors with features like concierge services, transportation benefits, and technology-driven care coordination.

Why Does ALHC Stand Out?

1. Customer trends over the past two years show it’s maintaining a steady flow of new contracts that can potentially increase in value over time
2. Notable projected revenue growth of 38.6% for the next 12 months hints at market share gains
3. Adjusted operating margin expanded by 2.1 percentage points over the last two years as it scaled and became more efficient

Alignment Healthcare is trading at $17.34 per share, or 79.8x 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

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. 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.