1 Surging Stock with Exciting Potential and 2 to Avoid

Exciting developments are taking place for the stocks in this article. They’ve all surged ahead of the broader market over the last month as catalysts such as new products and positive media coverage have propelled their returns.

While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. On that note, here is one stock with the fundamentals to back up its performance and two that may correct.

Two Momentum Stocks to Sell:

Magnachip (MX)

One-Month Return: +28.2%

With its technology found in common consumer electronics such as TVs and smartphones, Magnachip Semiconductor (NYSE:MX) is a provider of analog and mixed-signal semiconductors.

Why Do We Avoid MX?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 18.5% annually over the last five years
2. Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
3. Cash-burning history and the downward spiral in its margin profile make us wonder if it has a viable business model

Magnachip’s stock price of $3.91 implies a valuation ratio of 0.7x forward price-to-sales. Dive into our free research report to see why there are better opportunities than MX.

Dell (DELL)

One-Month Return: +26%

Founded by Michael Dell in his University of Texas dorm room in 1984 with just $1,000, Dell Technologies (NYSE:DELL) provides hardware, software, and services that help organizations build their IT infrastructure, manage cloud environments, and enable digital transformation.

Why Do We Think DELL Will Underperform?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.3% annually over the last two years
2. Flat earnings per share over the last five years underperformed the sector average
3. 8.7 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

At $112.33 per share, Dell trades at 12.1x forward P/E. To fully understand why you should be careful with DELL, check out our full research report (it’s free).

One Momentum Stock to Watch:

ResMed (RMD)

One-Month Return: +16.2%

Founded in 1989 to address the then-underdiagnosed condition of sleep apnea, ResMed (NYSE:RMD) develops cloud-connected medical devices and software solutions that treat sleep apnea, COPD, and other respiratory disorders for home and clinical use.

Why Are We Positive On RMD?

1. Steady constant currency growth over the past two years shows the company can pursue its global ambitions, even in uncertain economic times
2. Additional sales over the last five years increased its profitability as the 15.7% annual growth in its earnings per share outpaced its revenue
3. Free cash flow margin expanded by 7.1 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends

ResMed is trading at $249.25 per share, or 24.2x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.

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.