The U.S. stock market remained mostly resilient, driven by a healthy economic backdrop and rate cuts by the Federal Reserve despite spells of volatility and inflationary pressure during 2024. Year to date, the S&P 500 is up 26.2%, the Dow Jones Industrial Average has gained 13.8%, and the Nasdaq Composite has risen 30.1%.
Moving on to 2025, the U.S. markets seem well-poised for growth, driven by steady consumer spending and booming technological innovation, especially AI, and a healthy labor market. However, inflation and geopolitical turmoil remain headwinds.
Amid such a market scenario, investors can consider momentum investing for good returns. Though quite risky, momentum investing can yield great results with proper planning.
Momentum strategy is a technical trading methodology whereby investors usually buy high in anticipation that a stock will only appreciate in the near term
Characteristically, this investment approach focuses on shorter to medium-term trends. Momentum strategies are often influenced by investor sentiment, which can drive the persistence of trends in the short term.
Here, the Zacks Style Score can prove beneficial. The Momentum Score indicates when the timing is favorable to enter a stock to gain from the momentum with the highest probability of success.
Therefore, stocks with a good Momentum score and a favorable Zacks Rank are likely to fetch solid returns.
We have shortlisted five such momentum stocks with solid upside potential based on their favorable Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) and a Momentum Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Using the above parameters, we have selected five stocks: Carvana Co. CVNA, Datadog, Inc. DDOG, Fortinet, Inc. FTNT, Amazon.com, Inc. AMZN and InterDigital, Inc. IDCC.
In addition to the abovementioned parameters, these companies have witnessed positive earnings estimate revisions in the last 30/60 days. This signifies that the market participants expect healthy growth opportunities for these companies in 2025.
Carvana: Headquartered in Phoenix, AZ, Carvana is a leading e-commerce platform for buying and selling used cars.
Carvana’s acquisition of ADESA’s U.S. operations has boosted its logistics, auction capabilities, and reconditioning efforts. Management has shifted focus from growth to operational efficiency. The company’s three-step plan — achieving positive adjusted EBITDA, boosting EBITDA per unit, and resuming growth with an efficient model — is driving its turnaround. For that, CVNA is focusing on enhancing operational efficiency across the business, with several technology, process and product initiatives underway. Also, the company has managed to reduce retail reconditioning and inbound transport costs.
CVNA sports a Zacks Rank #1 and a Momentum Score of B with a market cap of $46.2 billion. The Zacks Consensus Estimate for current-year earnings has improved by 111.9% to $1.25 per share over the last 60 days, indicating a year-over-year increase of 66.7%. The stock has risen 73.1% in the past six months.
Datadog: Delaware, NY-based Datadog is a monitoring and analytics platform for developers, IT operations teams and business users in the cloud age. The company’s business runs around its portfolio of over 400 out-of-the-box integrations, including public cloud, private cloud, on-premise hardware, databases and third-party software.
Datadog is gaining from new customer additions and higher uptake of its cloud-based monitoring and analytics platform, driven by accelerated digital transformation. The robust adoption of Synthetics and Network Performance Monitoring offerings is expected to drive customer wins in the near term.
DDOG carries a Zacks Rank #2 and a Momentum Score of B, with a market cap of $50.1 billion. The Zacks Consensus Estimate for current-year earnings has improved by 7.3% to $1.76 per share over the last 60 days, indicating a year-over-year increase of 33.3%. The stock has appreciated 23.8% in the past six months.
Fortinet: Headquartered in Sunnyvale, CA, Fortinet is a provider of network security appliances and Unified Threat Management (UTM) network security solutions to enterprises, service providers and government entities worldwide.
Fortinet is gaining from strength in demand from large enterprise customers and growth in the company’s security subscriptions amid a slowdown in networking products. Increased IT spending on cybersecurity is further expected to drive Fortinet’s revenues. The focus on enhancing its UTM portfolio through product development and acquisitions is another tailwind.
FTNT sports a Zacks Rank #1 and a Momentum Score of B, with a market cap of $73.9 billion. The Zacks Consensus Estimate for current-year earnings has improved by 9.9% to $2.23 per share over the last 60 days, indicating a year-over-year increase of 36.8%. The stock has appreciated 64.4% in the past six months.
Amazon: Amazon.com is one of the largest e-commerce providers in the world. Amazon also enjoys a leading position in the cloud-computing market, especially in the Infrastructure as a Service (IaaS) space, courtesy of its Amazon Web Services or AWS platform.
Amazon is gaining solid Prime momentum, owing to ultrafast delivery services and a strong content portfolio with a solid advertising business. Increasing adoption of the AWS services portfolio is aiding AMZN’s cloud dominance. The deepening focus on generative AI is a major plus. The company issued positive fourth quarter of 2024 guidance fueling investor enthusiasm.
AMZN carries a Zacks Rank #2 and a Momentum Score of A, with a market cap of $2,367 billion. The Zacks Consensus Estimate for current-year earnings has improved by 9.3% to $5.19 per share over the last 60 days, indicating a year-over-year increase of 79%. The stock has appreciated 20.6% in the past six months.
InterDigital: Wilmington, DE-based InterDigital engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular as well as wireless 3G, 4G and IEEE 802-related products and networks.
IDCC’s performance is being driven by solid licensing momentum and product innovation. It has leading companies such as Huawei, LG and Apple under its licensing agreement. Apart from its strong portfolio of wireless solutions, the addition of technologies related to sensors, user interface and video are likely to boost its offerings. Increased sales from CE and loT/Auto are a tailwind.
IDCC sports a Zacks Rank #1 and a Momentum Score of B, with a market cap of $4.8 billion. The Zacks Consensus Estimate for current-year earnings has improved by 46.9% to $15.22 per share over the last 60 days, indicating a year-over-year increase of 64.9%. The stock has appreciated 64.3% in the past six months.
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