Yahoo Finance

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.

But not every company with momentum is a long-term winner, and plenty of investors have lost money betting on short-term fads. All that said, here is one stock with lasting competitive advantages and two that may correct.

Two Momentum Stocks to Sell:

Marqeta (MQ)

One-Month Return: +33.3%

Founded by CEO Jason Gardner in 2009, Marqeta (NASDAQ:MQ) is an innovative card issuer that provides companies with the ability to issue and process virtual, physical, and tokenized credit and debit cards.

Why Does MQ Worry Us?

1. Software offerings aren’t resonating in this new AI paradigm as its revenue declined by 2.8% annually over the last three years

2. Gross margin of 69.4% reflects its relatively high servicing costs

At $5.20 per share, Marqeta trades at 4.3x forward price-to-sales. Read our free research report to see why you should think twice about including MQ in your portfolio, it’s free.

FuelCell Energy (FCEL)

One-Month Return: +22%

Founded in 1969, FuelCell Energy (NASDAQ: FCEL) is a leading manufacturer and developer of carbonate fuel cell technology for stationary power generation.

Why Are We Hesitant About FCEL?

1. Backlog growth averaged a weak 1% over the past two years, suggesting it may need to tweak its product roadmap or go-to-market strategy

2. Free cash flow margin dropped by 73.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up

3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

FuelCell Energy is trading at $4.55 per share, or 0.6x forward price-to-sales. Dive into our free research report to see why there are better opportunities than FCEL.

One Momentum Stock to Buy:

Uber (UBER)

One-Month Return: +19.6%

Notoriously funded with $7.7 billion from the Softbank Vision Fund, Uber (NYSE:UBER) operates a platform of on-demand services such as ride-hailing, food delivery, and freight.

Why Should You Buy UBER?

1. Monthly Active Platform Consumers are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features

2. Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 183% outpaced its revenue gains

3. Free cash flow margin expanded by 17.7 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends