Flash in the Pan or Sustained Rally Contender? 3 Momentum Stocks to Watch

Key Points

• Velo3D is attempting to turn improving revenue, margins and balance-sheet strength into a more durable recovery.
• Aehr Test Systems is benefiting from growing demand and repeat orders across several semiconductor end markets.
• Atlassian’s sharp rebound has put renewed attention on whether AI adoption and enterprise demand can sustain its momentum.

Momentum stocks have a natural appeal across Wall Street, but not every breakout moment turns into a lasting rally. Still, when companies are supported by improving earnings and fundamentals, expanding industries, or other underlying strengths, they may be better able to convert a one-time share price boost into a longer-term trend.

Investors may find themselves attempting to make this determination about Velo3D Inc. NASDAQ: VELO, Aehr Test Systems NASDAQ: AEHR, and Atlassian Corp. NASDAQ: TEAM. Each of these companies has experienced a rally in the last month, although to very different degrees. They show how varying catalysts—from restructuring efforts to broader tech trends and AI adoption—can initiate a breakout that may either be just picking up or, potentially, difficult to maintain at its current pace. The key question for investors is whether these companies are able to sustain their recent growth.

Velo3D Crafts a Real Turnaround After Numerous Hurdles

Velo3D is a metal 3D-printing technology firm building components for aerospace, defense, and other specialized applications. In theory, Velo3D may be a good candidate as a tollbooth company, as it has the capacity to manufacture metal components that are not possible to build using traditional methods. However, the company has had some significant headwinds in recent years, including liquidity concerns and operational restructuring.

The firm may be in the early stages of a turnaround, though. Management's focus on boosting revenue—52.3% year over year (YOY) in the latest quarter—and gross margin while also reducing debt may be able to stabilize the company's balance sheet. Debt fell by more than 70% in the latest quarter alone, a sign that the company is making real progress on some of these goals. As a bonus, Velo3D also raised both the bottom and top ends of its full-year revenue guidance by $5 million and now expects the figure to be between $65 million and $75 million.

Despite these balance sheet wins, though, it's important for investors to keep in mind the continued risks of Velo3D. The company is still unprofitable, and even with improved liquidity, that challenge remains as well. Still, marked improvements to short interest and a share price improvement of nearly 19% in the last month—with analysts predicting another roughly 65% in upside to come—may be enough to convince investors that the recent rally could continue.

Aehr's Risks Remain, But Growing Bookings and Demand Bode Well

Another company finding a critical niche in a high-demand industry, Aehr Test Systems provides essential test and burn-in equipment for semiconductors. The more AI processors deliver to customers, the greater the need for quality control, and Aehr benefits in this scenario. Between growing bookings, an expanding backlog, and continued demand growth across multiple end markets, Aehr has built crucial momentum. The fact that follow-on production orders are also increasing may be evidence that the company can successfully build a repeat customer base.

Shares are up over the last month, thanks to surging orders and the company's recent earnings report, which showed improved bookings and multiple large production orders. Still, the company is in a somewhat precarious financial position: revenue fell 44% YOY last quarter, with a non-GAAP net loss of $1.5 million and a dip in gross margin. These factors prompted Aehr to raise capital via an at-the-market offering that risks diluting shareholder positions.

Atlassian's Recent Rally Is Impressive But May Be Hard to Maintain

Of all the stocks on this list, Atlassian has had the most dramatic breakout in recent weeks: shares have surged by more than 87% in the last month alone. As a key collaboration platform for enterprise customers, Atlassian has a key opportunity to integrate AI tools into its offerings.

The catalyst for the company's recent share price boost was its unusually strong fiscal Q4 results, which saw impressive top- and bottom-line wins, on top of 28% YOY revenue improvement. Bookings are as strong as they have ever been, with Atlassian posting record large-enterprise deals, while subscription annual recurring revenue climbed 23% YOY to $6.6 billion—a sign that the company's growth may be sustainable over time.

To be sure, analyst expectations for Atlassian are quite high, with 24 out of 29 rating TEAM a Buy. It may be difficult for the firm to continue posting results that will sustain the rally it has seen in recent weeks. Investors may instead want to evaluate whether the latest updates suggest that Atlassian will be able to convert AI interest to sustainable revenue and demand over the medium-to-long term, then search for an opportunity to buy a future dip.

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