The stocks featured in this article are seeing some big returns. Over the past month, they’ve outpaced the market due to some combination of positive news, upbeat results, or supportive macro developments. As such, investors are taking notice and bidding up shares.
However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. On that note, here are three stocks that are likely overheated and some you should look into instead.
Target Hospitality (TH)
One-Month Return: +15.9%
Building mini-communities at places such as oil drilling sites, Target Hospitality (NASDAQ: TH) is a provider of specialty workforce lodging accommodations and services.
Why Are We Out on TH?
- Number of utilized beds has disappointed over the past two years, indicating weak demand for its offerings
- Low free cash flow margin of 7.9% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $18.53 per share, Target Hospitality trades at 39.8x forward P/E. If you’re considering TH for your portfolio, see our FREE research report to learn more.
Moderna (MRNA)
One-Month Return: +159%
Rising to global prominence during the COVID-19 pandemic with one of the first effective vaccines, Moderna (NASDAQ: MRNA) develops messenger RNA (mRNA) medicines that direct the body's cells to produce proteins with therapeutic or preventive benefits for various diseases.
Why Do We Think MRNA Will Underperform?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 20.5% annually over the last five years
- Sales were less profitable over the last five years as its earnings per share fell by 24.5% annually, worse than its revenue declines
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 95.9 percentage points
Moderna is trading at $147.75 per share, or 29.4x forward price-to-sales. Read our free research report to see why you should think twice about including MRNA in your portfolio.
10x Genomics (TXG)
One-Month Return: +30.6%
Founded in 2012 by scientists seeking to overcome limitations in traditional biological research methods, 10x Genomics (NASDAQ: TXG) develops instruments, consumables, and software that enable researchers to analyze biological systems at single-cell resolution and spatial context.
Why Should You Sell TXG?
- Sales tumbled by 1.2% annually over the last two years, showing market trends are working against it during this cycle
- Smaller revenue base of $616.9 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Negative returns on capital show management lost money while trying to expand the business
10x Genomics’s stock price of $62.50 implies a valuation ratio of 1,370x forward P/E. Dive into our free research report to see why there are better opportunities than TXG.
Stocks We Like More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
