Breakout Momentum Plays You May Not Know About

Key Points

• Volatility in the market may provide opportunities for momentum investors to capture gains while stocks are on the upswing.
• Two under-the-radar small-cap names—EyePoint and Ouster—stand out for recent strength in earnings and operational success.
• A third, slightly larger company, Nova, plays an essential role in the much-hyped semiconductor industry and has also enjoyed recent momentum.

High volatility has plagued markets throughout much of 2025. While many consider this a bad thing, particularly when trends point downward, it can also create opportunities for momentum investors to capture gains when target stocks are up. Of course, timing a momentum play can be easier said than done.

Regarding momentum investing, traders may have an advantage if they can identify targets early in a sustained rally and, potentially, if those stocks are relatively unknown by the broader investing community.

Three such companies, two small-cap firms and one slightly larger in a niche segment of a popular industry, have trended upward recently and may be worth closer consideration by investors seeking the next momentum target.

Promising Clinical Trial Data Drives EyePoint Rally

First up is EyePoint Pharmaceuticals Inc. NASDAQ: EYPT, a clinical-stage biopharma firm developing treatments for patients with retinal diseases. In May, EyePoint reported results for the first quarter of the year, including top-line performance that shattered analyst expectations.

While forecasts had called for revenue of just under $9 million, EyePoint generated nearly $25 million in the first months of the year. The company posted losses per share in line with analyst predictions; like many clinical-stage pharmaceutical firms, sustained profitability remains elusive pending the success of one or more commercially viable drug candidates.

The company is getting closer to that milestone all the time. Its lead drug candidate, DURAVYU, recently exceeded enrollment for a critical Phase 3 clinical trial, and EyePoint expects top-line data from the trial in 2026. DURAVYU is a candidate for treatment of wet age-related macular degeneration, but EyePoint also sees potential for its use in diabetic macular edema. EyePoint ended the first quarter with more than $318 million in cash and investments, sufficient to sustain operations through 2027.

EYPT shares are up more than 19% in the last month, and based on a consensus price estimate of $25.38, analysts expect growth is just beginning; this estimate would suggest the price of EYPT stock could more than triple from current levels.

Crucial Semiconductor Manufacturing Systems Keep Nova Essential

Nova Ltd. NASDAQ: NVMI designs and builds process control systems used in the manufacturing of semiconductors, making it an essential part of a highly popular industry. Nova has also offered stellar earnings results this year, with quarterly revenue rising by more than 50% year-over-year (YOY) in the first months of the year, topping analyst predictions. Earnings per share (EPS) of $2.18 beat analyst estimates by 10 cents.

This momentum is expected to continue, as analysts suggest Nova's earnings growth could be more than 7% in the future.

Nova also has noteworthy cash flow improvement; YOY cash flow growth is about 32%, helping to ensure it has ample room to scale up operations, expand its offerings, or buy back shares.

NVMI shares have climbed by more than 10% in the last month, and again, analysts expect this growth to continue. With a consensus price target of $277, NVMI could have upside potential of over 27%. Four out of five analysts rating NVMI shares have assigned it a Buy, signaling widespread optimism.

Leading LiDAR Tech Brings Major Partnerships and Growth for Ouster

Ouster Inc. NYSE: OUST provides LiDAR technology for 3D mapping and imaging. This makes the company a vital partner for other companies in the robotics, automation, and automotive industries, among many others. The critical nature of Ouster's technological offerings has led to numerous recent partnerships, including with construction and heavy machinery builder Komatsu, German manufacturing firm LASE PeCo, and others.

Ouster's $33 million in revenue for the first quarter beat earnings estimates and climbed by 26% YOY, and GAAP gross margin of 41% improved significantly over 29% one year prior. Perhaps most importantly for future momentum, the company projects between $32 million and $35 million in second-quarter revenue, highlighting major upside potential. All seven analysts reviewing OUST shares have provided a Buy rating.

Ouster has experienced a more significant rally than either company above, climbing by more than 71% in the last year. Analysts still view the possibility of additional upside, although investors may need to act quickly. On the other hand, this firm may also be poised for long-term success given the increase in demand for robotics and automation services across multiple sectors.