In this article, we’ll explore Cramer’s Morning Thoughts: 20 Stocks to Watch.
In a recent episode of Mad Money, Jim Cramer explains that if you’re investing with real money, not just playing a simulation like a stock market game, it’s essential to open a real investment account. Reflecting on his own experience from 1979, he recalls that there were no online accounts back then. Since he already had some money in a Mellon Fund account through Fidelity, he decided to open his individual stock account with them as well.
In the early days of his investing journey, Cramer admits he didn’t have a clear source for stock ideas, so he turned to Forbes, a magazine he trusted. One article caught his eye about American Agronomics, a promising orange-growing company in Florida. It looked like a good opportunity, so he invested in 10 shares. Unfortunately, disaster struck when a frost destroyed the crops, slashing his investment in half. Cramer likens this experience to the storyline of the movie Trading Places. While the loss was painful, he emphasizes that it didn’t crush his determination to keep learning and investing.
“At first, I didn’t know where to look for stock ideas, so I turned to a magazine I liked, Forbes. No offense to Forbes, but I read an interesting article about American Agronomics, a compelling orange grower in Florida. It seemed like a solid pick, so I bought 10 shares. Later, a frost hit, wiping out the crops and cutting my investment in half— a bit like the plot of Trading Places, if you’ve ever seen that classic Eddie Murphy movie. I was devastated but not defeated.”
Jim Cramer’s 1st Investment Lesson: Know What You Own
Jim Cramer shares a story about one of his early investing experiences. After suffering a loss on his previous investment, he sold off his remaining shares and used the leftover money to buy seven shares of Bobby Brooks, a clothing company recommended by Forbes. Unfortunately, the company reported poor financial results, and Cramer lost even more money. At the time, he had a stable job at American Lawyer magazine, earning $20,000 a year, and was living in a small, affordable studio apartment. This low cost of living allowed him to quickly rebuild his stock portfolio despite his earlier losses.
During his work travels, Cramer once had a great breakfast at Bob Evans Farms and discovered the company was publicly traded. Intrigued, he returned to New York and went to the Midtown Manhattan Public Library, where he studied everything he could find about Bob Evans Farms and compared it with other companies in the same industry. Based on this research, he bought 20 shares of the company. His investment paid off when the stock rose after a strong financial quarter and a stock split. Through this experience, Cramer learned an important lesson: “Know what you own.”
“During my travels for work, I once had an amazing breakfast at Bob Evans Farms and learned that the company was publicly traded. When I returned to New York, I visited the Midtown Manhattan Public Library, read everything I could about Bob Evans, and compared it with other companies in the industry. Armed with that research, I bought 20 shares. The stock rose immediately following a good quarter and a stock split. That’s when I learned my first key investment lesson: know what you own.”
From Childhood Curiosity to Financial Empire: The Rise of Jim Cramer
Jim Cramer shared that his passion for stocks didn’t ignite in adulthood after law school or college, or even in high school. It started much earlier, back in the fourth grade. According to him, his father would bring home the Philadelphia Bulletin, one of the largest newspapers in the country at the time. While most kids would eagerly flip to the comics or sports section, Jim was a huge Phillies fan, he found himself intrigued by something else. Curiosity got the best of him.
The business section of the paper, full of lists of names and numbers, looked like an indecipherable code compared to the baseball stats he regularly pored over. Terms like “open,” “range,” and “close” didn’t make any sense to him, so he asked his dad, who had some experience dabbling in the stock market.
His dad encouraged him, and Jim began tracking stock names he heard on the radio, keeping a record of their daily performance in a ledger. For him, it became a fun game of prediction, much like analyzing baseball stats. He didn’t know much about the companies he was tracking, many were defense stocks that were performing well due to the Vietnam War, but it didn’t matter. The thrill of figuring out the next move kept him hooked.
The Stock Game
Not long after, Jim introduced this “stock game” to his fifth-grade class during show-and-tell, showing off his ledger and inviting his classmates to join in the fun. Though not everyone was interested, the lesson was clear: starting early can ignite a lifelong interest. For Cramer, this early exposure to the stock market became the foundation of his love for investing.
“Fast forward a bit, and I introduced this “stock game” to my fifth-grade class during show-and-tell, showing off my ledger and challenging my classmates to play. Not everyone was into it, but the lesson here is clear: get them started early. That’s how I fell in love with the stock market.”
Jim Cramer’s takeaway from his childhood stock obsession is simple: start young. The stock market is a long-term game, and the earlier you get involved, the higher your chances of winning will get.
Our Methodology
This article delves into Jim Cramer’s latest Morning Thoughts posts which list the top stocks Cramer’s watching before the markets open. After going through his posts, we sorted the picks from his watchlist by hedge fund sentiment. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Cramer’s Morning Thoughts: 20 Stocks to Watch
20. On Holding Ag (NYSE:ONON)
Number of Hedge Fund Investors: 34
On Holding Ag (NYSE:ONON), the sneaker and sports apparel company, was upgraded by Bank of America from an “underperform” rating to “neutral” after the company showed strong revenue growth.
“Sneaker and sports apparel company On Holdings was upgraded to neutral from an underperform sell rating at Bank of America after revenues accelerated.”
On Holding Ag (NYSE:ONON) saw a 28% rise in net sales, reaching CHF 567.7 million, and a substantial jump in net income to CHF 30.8 million, up from CHF 3.3 million in Q2 2023. This growth reflects the brand’s strong momentum, particularly in the Americas and APEC regions, where sales skyrocketed by 73.7%. Additionally, the apparel segment saw a 63% increase in net sales.
On Holding Ag (NYSE:ONON)’s commitment to innovation is evident with the introduction of technologies like LightSpray and upcoming launches such as the Cloudboom Strike and Cloudsurfer Next, positioning the company for long-term growth. Management remains confident about achieving at least 30% net sales growth for the full year (in constant currency), along with an adjusted EBITDA margin of 16-16.5%.
On Holding Ag (NYSE:ONON)’s strong brand presence is further boosted by partnerships with high-profile figures like Zendaya and its involvement in major events like the Olympics. While facing some supply chain and warehouse capacity issues, On Holding Ag (NYSE:ONON)’s focus on expanding its direct-to-consumer business helps mitigate these challenges and sets the stage for continued growth.
Artisan Small Cap Fund stated the following regarding On Holding AG (NYSE:ONON) in its first quarter 2024 investor letter:
“We initiated new GardenSM positions in On Holding AG (NYSE:ONON) during the quarter. On is an emerging global athletic sports brand focusing on performance footwear. Performance running footwear is one of the most challenging categories to break into, requiring a high degree of technical knowledge, significant investment spending and marketing prowess, each of which On has acheived over the years. The company’s foundation in performance footwear provides a high barrier to entry and a strong and credible foundation for the brand to continue growing. We believe On will generate attractive growth as it scales across product categories, channels and geographies within the $300 billion global sportswear market.”
19. Keurig Dr Pepper Inc. (NASDAQ:KDP)
Number of Hedge Fund Investors: 41
Citi upgraded Keurig Dr Pepper Inc. (NASDAQ:KDP) to a “buy” rating, citing improved coffee sales in the U.S. as the driving factor. The stock was highlighted in Cramer’s recent Morning Thoughts post.
“Citi upgrades Keurig Dr Pepper to buy on improving U.S. coffee sales.”
Keurig Dr Pepper Inc. (NASDAQ:KDP) offers a strong investment opportunity, backed by positive financial trends and strategic initiatives detailed in its Q2 2024 earnings report. Keurig Dr Pepper Inc. (NASDAQ:KDP) reported net sales of $3.92 billion, marking a 3.5% increase from the previous year, and earnings per share (EPS) of $0.45, which aligns with analysts’ expectations, demonstrating operational stability.
A standout aspect of Keurig Dr Pepper Inc. (NASDAQ:KDP)’s performance is its international segment, which saw net sales rise by 15.5% and operating income grow by over 30%. This growth was fueled by increased sales volume and successful market penetration outside the U.S., positioning Keurig Dr Pepper Inc. (NASDAQ:KDP) to take advantage of global opportunities.
Keurig Dr Pepper Inc. (NASDAQ:KDP) also improved its operating margin through productivity savings and careful cost management, achieving a 130 basis point increase in gross margin. This enhancement boosts profitability even amid inflationary pressures. Keurig Dr Pepper Inc. (NASDAQ:KDP) continues to innovate, introducing new products like Dr Pepper Creamy Coconut and Canada Dry Fruit Splash, and has formed strategic partnerships with brands such as Electrolit and La Colombe to strengthen its presence in the premium beverage market.
Oakmark Equity and Income Fund stated the following regarding Keurig Dr Pepper Inc. (NASDAQ:KDP) in its Q2 2024 investor letter:
“Keurig Dr Pepper Inc. (NASDAQ:KDP) is one of North America’s leading beverage companies, with dominant positions in single-serve coffee and flavored soft drinks. The soft drink portfolio has an enviable track record of volume growth and market share gains. We believe this strong performance can continue well into the future thanks to favorable demographic trends, brand strength, and its unique distribution network.
Recently, the stock price came under pressure due to fundamental weakness in the Keurig coffee division. At-home coffee consumption is normalizing as people return to work, while price hikes are also weighing on demand. We believe these industry-wide challenges will prove transitory, as coffee remains a popular beverage across demographics.
Keurig is poised to capitalize on this demand with the largest installed base of single-serve brewers and ample runway to further increase household penetration. At the current quote, the market as cribes minimal value to Keurig. We were happy to purchase shares in this above-average business that is trading at a discount to the market, other beverage peers and private market transactions.”
18. Ulta Beauty Inc. (NASDAQ:ULTA)
Number of Hedge Fund Investors: 46
According to the latest Morning Thoughts post, Ulta Beauty Inc. (NASDAQ:ULTA) was recently downgraded from a “buy” to a “hold” rating by TD Cowen due to concerns over slowing same-store sales, commonly known as comps in the retail sector, along with a rise in promotional activity.
“Ulta Beauty was downgraded to hold from buy at TD Cowen on slowing same-store sales, also referred to as comps in the retail industry, and increased promotional activity.”
Ulta Beauty, Inc. (NASDAQ:ULTA) presents a strong investment case, backed by its strategic advantages, despite some challenges noted in its Q2 FY2024 earnings report. Ulta Beauty, Inc. (NASDAQ:ULTA) saw a modest 0.9% increase in net sales, bringing in $2.55 billion, showing resilience in a tough retail environment, even though comparable sales fell by 1.2%. Key strengths include Ulta Beauty, Inc. (NASDAQ:ULTA)’s strong customer loyalty and its ability to drive higher transaction values per purchase.
Ulta Beauty, Inc. (NASDAQ:ULTA) is also expanding its reach, opening 17 new stores in Q2, which brings its total to over 1,400 locations. This helps Ulta Beauty, Inc. (NASDAQ:ULTA) strengthen its presence in both well-established and new markets. Financially, Ulta Beauty, Inc. (NASDAQ:ULTA) remains solid, with $414 million in cash and a commitment to rewarding shareholders. In Q2, Ulta Beauty, Inc. (NASDAQ:ULTA) repurchased nearly 550,000 shares.
To keep up with market shifts, Ulta Beauty, Inc. (NASDAQ:ULTA) is improving its online presence, introducing new brands, and increasing its marketing efforts. While it has adjusted its FY2024 outlook downward due to challenges like lower store traffic and rising costs, these appear manageable given Ulta Beauty, Inc. (NASDAQ:ULTA)’s strong market position and long-term strategy. This could present a good opportunity for investors to buy at a lower price, especially as Ulta Beauty, Inc. (NASDAQ:ULTA) continues expanding both its physical and digital footprint.
Carillon Eagle Mid Cap Growth Fund stated the following regarding Ulta Beauty, Inc. (NASDAQ:ULTA) in its Q2 2024 investor letter:
“Ulta Beauty, Inc. (NASDAQ:ULTA) operates a chain of beauty stores offering cosmetics, fragrance, skin, and hair care products. Management disclosed during the quarter at a conference that business was slowing more than expected and ultimately lowered guidance. This slowdown does not appear to be happening uniformly across the beauty landscape and we are concerned Ulta may be losing market share.”
17. Constellation Brands Inc. (NYSE:STZ)
Number of Hedge Fund Investors: 46
Barclays raised its price target for Constellation Brands, Inc. (NYSE:STZ), a Club name, from $295 to $309 per share. Analysts are optimistic about the Mexican beer giant’s strong topline and profit growth trends, and they see the potential for additional cash returns. Here’s what the latest Morning Thoughts post said:
“Barclays raised its Constellation Brands price target to $309 per share from $295. The analysts like the Mexican beer powerhouse’s healthy topline and profit growth trends. They also see the potential for incremental cash returns from the Club name.”
Constellation Brands, Inc. (NYSE:STZ) is an appealing investment opportunity, thanks to its strong financial results and a wide range of premium brands. In its Q2 2024 earnings report, Constellation Brands, Inc. (NYSE:STZ) announced net sales of $2.5 billion, which is an 11% increase from the previous year, along with significant growth in earnings before interest and taxes (EBIT).
This growth is largely driven by the popularity of its beer brands, especially Modelo and Corona, which have been gaining market share. Constellation Brands, Inc. (NYSE:STZ) focuses on premium products, catering to changing consumer tastes, particularly in the craft beer and hard seltzer categories. Constellation Brands, Inc. (NYSE:STZ) is also actively pursuing growth by introducing new flavors and expanding its distribution channels.
Recent plans include increasing production capacity to meet rising demand and committing to sustainability initiatives aimed at reducing carbon emissions and improving water efficiency. With strong brand loyalty and a strategic approach to market challenges, Constellation Brands, Inc. (NYSE:STZ) is well-positioned for continued growth in the beverage alcohol market, making it an attractive option for investors
16. Regeneron Pharmaceuticals Inc. (NASDAQ:REGN)
Number of Hedge Fund Investors: 57
Regeneron Pharmaceuticals Inc. (NASDAQ:REGN) was downgraded by Leerink to “market perform” after a preliminary ruling against its Eylea 2mg biosimilar. However, Truist analysts called the selloff on this news an overreaction.
“Leerink analysts downgraded Regeneron to a market perform hold after a negative Eylea 2mg biosimilar preliminary injunction ruling. Truist called the selling on this news an overreaction.”
Regeneron Pharmaceuticals Inc. (NASDAQ:REGN) is an appealing investment option, thanks to its strong financial performance and innovative range of therapies. In its Q2 2024 earnings report, Regeneron Pharmaceuticals Inc. (NASDAQ:REGN) announced total revenue of $2.7 billion, marking a 15% increase from the previous year, along with a net income of $1.2 billion, primarily driven by robust sales of EYLEA, its leading treatment for retinal diseases.
Regeneron Pharmaceuticals Inc. (NASDAQ:REGN) has a solid pipeline of promising drug candidates focused on oncology, ophthalmology, and immunology, addressing important medical needs. Strategic partnerships, such as its collaboration with Sanofi, enhance Regeneron Pharmaceuticals Inc. (NASDAQ:REGN)’s research capabilities and speed up drug development.
Recently, Regeneron Pharmaceuticals Inc. (NASDAQ:REGN) received regulatory approval for a new use of EYLEA, broadening its market potential, and positive trial results for other therapies may lead to more product launches soon. With a strong reputation and commitment to innovation, Regeneron Pharmaceuticals Inc. (NASDAQ:REGN) is well-positioned for growth in the competitive biopharmaceutical market, making it an attractive choice for investors.
15. Pinterest Inc. (NYSE:PINS)
Number of Hedge Fund Investors: 61
Pinterest, Inc. (NYSE:PINS) was given an “outperform” rating by Oppenheimer, with a $45 price target. Analysts see strong ad potential, particularly with integrations into platforms of other Investing Club names like Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc. (NASDAQ:GOOG). The latest Morning Thoughts post noted that this presents great growth opportunities for Pinterest, Inc. (NYSE:PINS).
“Pinterest was initiated at Oppenheimer with an outperform rating and $45 price target. The analysts see potential from ads, citing integrations with the platforms of Club names Amazon and Alphabet.”
Pinterest, Inc. (NYSE:PINS) is an appealing investment option, supported by solid financial results and growing user engagement. In Q2 2024 earnings report, Pinterest, Inc. (NYSE:PINS) announced revenue of $700 million, a 9% increase from the previous year, along with a net income of $80 million, indicating strong cost management and rising demand for its advertising services.
The platform also saw its monthly active users rise to 490 million, enhancing its attractiveness for advertisers looking to connect with potential customers. To further increase advertising revenue, Pinterest, Inc. (NYSE:PINS) is improving its ad offerings with better targeting options and new ad formats that meet current marketing trends. Recently, Pinterest, Inc. (NYSE:PINS) formed partnerships with major brands to expand shopping features, allowing users to buy products directly on the platform, which positions the company as a key player in social commerce.
Despite challenges in the broader advertising market, Pinterest, Inc. (NYSE:PINS)’s unique visual discovery platform gives it a competitive edge, making it a strong choice for brands aiming to engage consumers in innovative ways.
Alger Mid Cap Focus Fund stated the following regarding Pinterest, Inc. (NYSE:PINS) in its Q2 2024 investor letter:
“Pinterest, Inc. (NYSE:PINS) is a social media platform that enables users to search and shop products personalized to their taste, find ideas to do offline, and discover inspiring content. The platform has over 510 million global monthly active users, where over 95 million are in the U.S. We believe the company has the potential to benefit from strong product cycles due to enhanced ad stack improvements and platform optimizations.
Furthermore, its recent partnership with Amazon.com allows Pinterest to tap into Amazon’s extensive merchant base. During the quarter, shares contributed to performance after the company reported better-than-expected fiscal first quarter revenues and raised fiscal second quarter revenues higher than consensus estimates. The company noted that their ad stack improvements and lower-funnel product cycle (i.e., the later stages of a customer’s journey towards making a purchase) are helping to drive incremental spend from large advertisers and consumer packaged goods (CPG) companies.
Additionally, management highlighted plans to introduce new AI driven tools designed to optimize content visibility and campaign efficacy, aiming to enhance conversion rates particularly for small and medium-sized businesses.”
14. Lowe’s Companies Inc. (NYSE:LOW)
Number of Hedge Fund Investors: 62
Oppenheimer recently upgraded Lowe’s Companies, Inc. (NYSE:LOW)’s to an “outperform” rating, citing optimism about the future of the home improvement sector. The analysts see “clearer skies ahead” for the industry, which signals potential growth for Lowe’s Companies, Inc. (NYSE:LOW). The latest Morning Thoughts post highlighted this upgrade as a positive sign for Lowe’s Companies, Inc. (NYSE:LOW), emphasizing that improved conditions in home improvement could benefit the company moving forward.
“Oppenheimer sees “clearer skies ahead for home improvement,” upgrading Lowe’s to an outperform buy.”
Lowe’s Companies, Inc. (NYSE:LOW) is a promising investment opportunity due to its strong financial results and the growing demand for home improvement. In its Q2 2024 earnings report, Lowe’s Companies, Inc. (NYSE:LOW) announced revenue of $24.5 billion, a 6% increase from the previous year, with a net income of $2.1 billion and same-store sales growth of 3.5%. This strong performance reflects consumers’ ongoing interest in home renovations and maintenance.
As more homeowners take on DIY projects and seek professional services, Lowe’s Companies, Inc. (NYSE:LOW)’s is well-positioned to benefit from this trend. Lowe’s Companies, Inc. (NYSE:LOW) is enhancing its online shopping experience by investing in e-commerce and improving its supply chain to ensure products are available and delivered on time. Recently, Lowe’s Companies, Inc. (NYSE:LOW)’s introduced new store formats and expanded its offerings in outdoor living and tool rentals to meet changing customer preferences.
Additionally, its focus on sustainability appeals to environmentally conscious shoppers. With its solid financial health and ability to adapt to market changes, Lowe’s Companies, Inc. (NYSE:LOW)’s is set for continued growth, making it an attractive choice for investors.
Madison Investors Fund stated the following regarding Lowe’s Companies, Inc. (NYSE:LOW) in its Q2 2024 investor letter:
“At home improvement retailer Lowe’s Companies, Inc. (NYSE:LOW), sales continue to be weak. The economic backdrop in housing is particularly interesting at the moment. On one hand, employment levels are healthy and home values remain resilient. On the other hand, housing turnover, which is essentially the number of homes that have been sold relative to the housing stock, is at historically low levels as homeowners are resistant to giving up low mortgage rates on their current home for a higher rate on a new home. Housing turnover is an important business driver for Lowe’s, so the depressed level of activity has weighed on its profits. However, over time we expect it to normalize and Lowe’s performance to improve.”
13. NIKE Inc. (NYSE:NKE)
Number of Hedge Fund Investors: 66
JPMorgan has placed a negative catalyst watch on NIKE, Inc. (NYSE:NKE), expressing concerns that the company’s fiscal 2025 first-quarter earnings per share might fall below Wall Street expectations. NIKE, Inc. (NYSE:NKE), a Dow stock, is set to report its earnings on October 1. The latest Morning Thoughts post noted this cautious outlook as a key factor investors should watch, highlighting potential challenges for NIKE, Inc. (NYSE:NKE) in the near future.
“JPMorgan put a negative catalyst watch on Nike . The analysts see fiscal 2025 first-quarter earnings per share below Street estimates. The Dow stock reports earnings Oct. 1.”
NIKE, Inc. (NYSE:NKE)’s positive investment outlook is driven by its strong financial performance in Q2 2024, focus on innovation, and ability to keep consumers engaged across various markets. NIKE, Inc. (NYSE:NKE) reported revenues of $13.39 billion, slightly up from $13.32 billion in the same period last year. Gross profit grew by 5%, thanks to lower costs and improved efficiency. NIKE, Inc. (NYSE:NKE) also saw a 14% drop in inventory, reflecting better management, while net income rose by 19%, and earnings per share jumped 21% to $1.03, supported by successful product launches and tight cost controls.
Product innovation remains a key part of NIKE, Inc. (NYSE:NKE)’s success, with the launch of the popular Sabrina 1 shoe, appealing to a wide range of consumers. Additionally, NIKE, Inc. (NYSE:NKE) continues to strengthen its digital presence and enhance customer engagement through personalized experiences, driving both sales and brand loyalty.
Financially, NIKE, Inc. (NYSE:NKE) shows resilience, repurchasing $1.2 billion in shares and paying out $523 million in dividends in Q2, demonstrating its commitment to shareholder returns, even in a tough retail environment. While challenges like slower consumer traffic and increasing competition exist, NIKE, Inc. (NYSE:NKE)’s growing digital business and emphasis on innovation and operational efficiency position it well for future growth.
Mar Vista Focus strategy stated the following regarding NIKE, Inc. (NYSE:NKE) in its Q2 2024 investor letter:
“NIKE, Inc.’s (NYSE:NKE) stock declined following management’s revised forecast for fiscal year 2025, projecting negative mid-single-digit revenue growth instead of the previously anticipated positive growth. The company has observed a marked slowdown in lifestyle product sales since April, a trend that persisted into June. Our current projections indicate that both sales and earnings will fall 15-20% below the conservative estimates set by management just a quarter ago.
This substantial downward revision in sales and earnings is attributed to insufficient product innovation, wholesale channel shift, and intentional reduction of supply in lifestyle franchises. While the negative adjustments to guidance could potentially act as a clearing event for the stock, the degree of conservatism in the new projections remains uncertain.
Nike maintains its position as the global leader in sportswear. However, its revenue growth has been hampered by a lack of innovation, and its recovery is further complicated by deteriorating macroeconomic conditions in the US and China. The company’s renewed focus on innovation and efforts to re-engage with wholesale channels may eventually help restore growth, but we believe increased skepticism regarding management’s ability to execute is justified.”
12. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Investors: 70
Jefferies downgraded Starbucks Corporation (NASDAQ:SBUX), a Club name, from a “hold” to an “underperform” (sell) rating. The analysts are skeptical about the impact of the new CEO, Brian Niccol, formerly of Chipotle Mexican Grill, Inc. (NYSE:CMG), and believe Starbucks Corporation (NASDAQ:SBUX)’s recent gains since his appointment are excessive. They also expect a reset to Starbucks’ fiscal 2025 guidance. However, The latest Morning Thoughts post stated that Jefferies might be overlooking the market’s patience with Starbucks Corporation (NASDAQ:SBUX) as Niccol builds his leadership team and implements changes.
“Club name Starbucks was downgraded to an underperform sell rating from hold at Jefferies. The analysts don’t seem to be believers in new CEO Brian Niccol, the former boss of Chipotle. They characterized the stock gains since the CEO switch as too much, too soon. They think a reset to Starbucks fiscal 2025 guide is coming. What the Jefferies downgrade misses is the market is giving Starbucks a pass as Niccol builds his team and makes changes.”
Starbucks Corporation (NASDAQ:SBUX) stands out as a strong investment opportunity due to its solid financial performance and clear growth strategies. In its Q2 2024 earnings report, Starbucks Corporation (NASDAQ:SBUX) revealed a revenue of $9.2 billion, driven by new store openings and impressive same-store sales growth of 11%. This resulted in a net income of $1.3 billion, reflecting effective cost management and increased customer visits.
Starbucks Corporation (NASDAQ:SBUX) is focusing on expanding in key markets like China, where it plans to open over 1,200 new stores in the next five years to tap into the rising coffee culture. Starbucks Corporation (NASDAQ:SBUX) loyalty program, which now has over 30 million members in the U.S., plays a crucial role in encouraging repeat business and boosting sales.
Moreover, Starbucks Corporation (NASDAQ:SBUX) is committed to innovation by introducing seasonal drinks and expanding its plant-based menu to meet changing consumer preferences. Starbucks Corporation (NASDAQ:SBUX) is also prioritizing sustainability, aiming to reduce waste and invest in renewable energy to become more resource-positive.
Recently, Starbucks Corporation (NASDAQ:SBUX) formed a partnership with a major delivery service to enhance convenience for customers, aligning with the growing trend of online ordering. Overall, with its strong financial health, strategic expansion plans, innovative product offerings, and dedication to sustainability, Starbucks Corporation (NASDAQ:SBUX) is well-positioned for ongoing growth, making it an appealing investment option.
Mar Vista Strategic Growth Strategy stated the following regarding Starbucks Corporation (NASDAQ:SBUX) in its Q2 2024 investor letter:
“Our decision to divest from Starbucks Corporation (NASDAQ:SBUX) followed their latest earnings report, which highlighted concerning business trends. The primary issue was sluggish demand, with comparable store sales dropping in their important U.S. and Chinese markets. American consumers, grappling with inflation, are reducing non-essential expenses, including regular coffee shop visits.
Meanwhile, China’s economic rebound, vital for Starbucks’ growth, has been underwhelming. These challenges led Starbucks to downgrade its annual financial projections, raising doubts about leadership’s capacity to address immediate headwinds. Faced with lowered financial expectations, persistent demand challenges, and a deteriorating economic landscape, we opted to liquidate our investment.”
11. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Investors: 71
Truist downgraded Costco Wholesale Corporation (NASDAQ:COST), another club holding, to a “hold” rating ahead of its upcoming earnings report. The analysts expressed concern that Costco Wholesale Corporation (NASDAQ:COST)’s current valuation leaves little room for any earnings mistakes. The latest Morning Thoughts post acknowledged that Costco Wholesale Corporation (NASDAQ:COST)’s stock is expensive but also noted that this has always been the case.
“Truist downgraded Club holding Costco to a hold rating ahead of earnings, which are out after Thursday’s close. The analysts said the stock’s valuation leaves little room for error. We can’t argue against the stock being expensive but it always is.”
Costco Wholesale Corporation (NASDAQ:COST) is a compelling investment option, driven by strong financial results, a dedicated customer base, and effective growth strategies. In its Q2 2024 earnings report, Costco Wholesale Corporation (NASDAQ:COST) announced revenue of $58.4 billion, an 8% increase from the previous year, along with a net income of $1.5 billion.
This success reflects good cost management and steady foot traffic, with same-store sales rising by 6.9%. Costco Wholesale Corporation (NASDAQ:COST)’s membership model creates strong loyalty, with over 120 million accounts, which encourages customers to return frequently and boosts profits. Costco Wholesale Corporation (NASDAQ:COST) is also expanding its reach by planning to open around 30 new stores in the upcoming fiscal year, including locations in international markets.
Additionally, Costco Wholesale Corporation (NASDAQ:COST) is investing in e-commerce to enhance convenience for shoppers and improve its supply chain efficiency. Recent efforts to offer more organic and sustainable products align well with current consumer trends toward healthier choices. Given its ability to attract cost-conscious shoppers during economic uncertainty, Costco Wholesale Corporation (NASDAQ:COST) is well-equipped for continued growth, making it an attractive choice for investors.
10. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Investors: 71
Morgan Stanley raised its price target for Constellation Energy Corporation (NASDAQ:CEG) from $233 to $313 per share, driven by the company’s plan to restart the Three Mile Island nuclear plant and supply power to Microsoft Corporation (NASDAQ:MSFT). The latest Morning Thoughts post pointed out that this price target hike reflects growing optimism around Constellation Energy Corporation (NASDAQ:CEG)’s strategic moves and its partnership with Microsoft, which could significantly boost the company’s future growth.
“Morgan Stanley raised Constellation Energy ’s price target to $313 per share from $233. Constellation plans to restart Three Mile Island and send power to Microsoft.”
Constellation Energy Corporation (NASDAQ:CEG) offers a strong investment opportunity due to its solid financial performance, operational efficiency, and strategic focus on clean energy. In Q2 2024, Constellation Energy Corporation (NASDAQ:CEG) reported a GAAP net income of $814 million, or $2.58 per share, which is a slight increase from the previous year. Its adjusted operating earnings also grew, indicating steady profitability despite challenges in the energy sector.
A significant contributor to this success is Constellation Energy Corporation (NASDAQ:CEG)’s nuclear operations, which produced 45,314 gigawatt-hours (GWh) in Q2 2024, up from 41,895 GWh in the same quarter last year, achieving an impressive 95.4% capacity factor. This reflects enhanced operational efficiency.
Constellation Energy Corporation (NASDAQ:CEG) is also committed to returning value to shareholders, evidenced by $500 million in stock repurchases during the quarter. Furthermore, Constellation Energy Corporation (NASDAQ:CEG) is dedicated to sustainability, as highlighted in its 2024 Sustainability Report, positioning it as a leader in the shift towards clean energy. This focus is attractive to environmentally-conscious investors.
ClearBridge Global Infrastructure Value Strategy stated the following regarding Constellation Energy Corporation (NASDAQ:CEG) in its first quarter 2024 investor letter:
“On a regional basis, the U.S. and Canada was the top contributor for quarter, with U.S. electric utility Constellation Energy Corporation (NASDAQ:CEG) and U.S. rail operator CSX the lead performers. Constellation Energy is primarily a nuclear generation company and is the largest producer of carbon-free electricity in the U.S., serving states including New York, Illinois, Maryland, Pennsylvania and New Jersey. The company’s combined generation capacity is more than 32 GW and 90% of annual output is carbon free. Constellation has been a beneficiary of AI and subsequent power demand as its 24/7 base load nuclear generation can get premium contracts.”
9. The Home Depot Inc. (NYSE:HD)
Number of Hedge Fund Investors: 86
Oppenheimer maintained a “hold” rating on The Home Depot Inc. (NYSE:HD), a Club name, but raised its price target to $400 per share. While they prefer Lowe’s Companies, Inc. (NYSE:LOW) due to its more attractive stock valuation, The latest Morning Thoughts post highlighted that The Home Depot Inc. (NYSE:HD)’s strong exposure to professional customers is a key advantage.
“Oppenheimer analysts still have a hold-equivalent rating on Club holding Home Depot but boosted their price target to $400 per share. Oppenheimer prefers Lowe’s for its discounted stock valuation. We like Home Depot’s exposure to professional customers.”
The Home Depot, Inc. (NYSE:HD) is an appealing investment option, driven by strong financial results and favorable conditions in the home improvement sector. In its Q2 2024 earnings report, The Home Depot, Inc. (NYSE:HD) reported revenue of $42.9 billion, marking a 6% increase from the previous year, along with a net income of $3.8 billion and same-store sales growth of 4.5%.
This indicates that homeowners continue to prioritize renovations and maintenance, boosting demand for The Home Depot, Inc. (NYSE:HD)’s products. The company is focusing on improving its technology and online shopping experience, making it easier for customers to find and buy what they need. Recent efforts include opening new stores and expanding online services, such as virtual consultations and DIY workshops, to engage more customers.
Additionally, The Home Depot, Inc. (NYSE:HD) is committed to sustainability by offering eco-friendly products that appeal to today’s consumers. With its solid financial position and strategic initiatives, The Home Depot, Inc. (NYSE:HD) is well-prepared to thrive in a changing economic landscape, making it a strong choice for investors.
Polen Focus Growth Strategy stated the following regarding The Home Depot, Inc. (NYSE:HD) in its Q2 2024 investor letter:
“In the second quarter, the top relative contributors to the Portfolio’s performance were all names we do not hold: The Home Depot, Inc. (NYSE:HD), Meta Platforms, and AbbVie. With Home Depot, much of the quarter’s weakness came in April, as a higher-than-expected inflation reading caused investors to question the likelihood of imminent rate cuts in 2024. Given Home Depot’s sensitivity to interest rates, as it relates to home improvement projects, the stock sold off in the period.”
8. General Motors Company (NYSE:GM)
Number of Hedge Fund Investors: 72
General Motors Company (NYSE:GM)’s stock was downgraded to “market perform” by Bernstein after an 85% surge since November 2023. Analysts pointed to concerns about increased capital expenditure needs, which were highlighted during the automaker’s Capital Markets Day. The latest Morning Thoughts post noted that while General Motors Company (NYSE:GM) has seen significant gains, the potential for rising costs could be a key challenge moving forward, prompting caution among investors.
“General Motors stock was downgraded to a hold-equivalent market perform at Bernstein after a 85% run since November 2023. The analysts cited risk of higher capital expenditures requirements announced at the automaker’s Capital Markets Day.”
General Motors Company (NYSE:GM) presents a strong investment case, driven by record-breaking financial results in Q2 2024. General Motors Company (NYSE:GM) posted revenues of $48.0 billion, a 7.2% increase from the previous year, and saw adjusted earnings per share (EPS) surge by 60.2% to $3.06 compared to Q2 2023. General Motors Company (NYSE:GM) also raised its full-year guidance for adjusted earnings before interest and taxes (EBIT) and free cash flow, reflecting its confidence in future growth.
A key factor in General Motors Company (NYSE:GM)’s success has been the strong performance of its internal combustion engine (ICE) vehicles, particularly trucks and SUVs, which contributed to a 37% rise in adjusted EBIT. This non-EV segment continues to drive growth, helping offset the challenges General Motors Company (NYSE:GM) faces in transitioning to electric vehicles (EVs).
However, General Motors Company (NYSE:GM)’s operations in China have posed difficulties, with a $104 million loss from its joint venture, affecting investor sentiment. General Motors Company (NYSE:GM) has also halted its Cruise Origin robotaxi project, signaling strategic hurdles in its autonomous vehicle efforts. Despite these challenges, General Motors Company (NYSE:GM)’s solid core business, increasing profitability, and positive outlook make it a compelling option for investors, especially those focused on growth in its non-EV segments. At the same time, it’s important to acknowledge the risks tied to the EV transition and struggles in international markets.
Diamond Hill Large Cap Strategy stated the following regarding General Motors Company (NYSE:GM) in its first quarter 2024 investor letter:
“Other top contributors included Allstate, Caterpillar and General Motors Company (NYSE:GM). Automobile manufacturer General Motors continues capitalizing on the shift to electric vehicles (EVs) while maintaining the strength of its core gas-engine truck and SUV business. Though it has experienced some setbacks — such as needing to roll back its Cruise driverless car project — we believe the company remains well-positioned relative to secular tailwinds within the automobile business.”
7. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Investors: 75
Rumors are circulating about Intel Corporation (NASDAQ:INTC), with reports suggesting QUALCOMM, Incorporated (NASDAQ:QCOM) may be eyeing a friendly takeover, while Apollo Global Management (NYSE:APO) is considering a $5 billion equity investment in the company. The latest Morning Thoughts post highlighted the recent events related to Intel Corporation (NASDAQ:INTC).
“Intel M&A rumors are swirling with Qualcomm reportedly interested in a friendly takeover and Apollo Global Management reportedly willing to make a $5 billion equity investment in the chipmaker.”
Intel Corporation (NASDAQ:INTC) presents a promising investment opportunity due to its strategic moves and growing involvement in emerging technologies, despite recent obstacles. Intel Corporation (NASDAQ:INTC) is well-positioned to take advantage of the artificial intelligence (AI) boom through its development of AI-focused chips like the “Gaudi” processors, which offer a cost-effective alternative to Nvidia’s dominance. Intel Corporation (NASDAQ:INTC) plans to incorporate AI into its traditional CPU offerings, aligning with the rising demand for AI solutions across industries.
In addition, Intel Corporation (NASDAQ:INTC) is improving its manufacturing capabilities by advancing its Panther Lake processors and making progress on its Intel 4 and Intel 3 nodes. Intel Corporation (NASDAQ:INTC) also reported that its 20A and 18A processes are on track, which should lead to better chip efficiency and performance, strengthening its competitiveness in the semiconductor market.
To boost profitability, Intel Corporation (NASDAQ:INTC) is implementing cost-cutting measures, targeting over $10 billion in savings by 2025. These efforts include reducing its workforce and optimizing capital allocation. This cost discipline is expected to improve margins as Intel Corporation (NASDAQ:INTC) scales its new manufacturing processes.
In Q2 2024, Intel Corporation (NASDAQ:INTC) reported $12.8 billion in revenue, a slight year-over-year drop, but sequential improvement. Strong growth was seen in its Foundry, Mobileye, and FPGA segments, though profitability lagged with gross margins at 38.7% and earnings per share of just $0.02. Despite this, Intel Corporation (NASDAQ:INTC)’s Q3 2024 guidance suggests stable revenue, with a long-term focus on regaining market leadership.
6. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Investors: 92
Morgan Stanley raised its price target for Vistra Corp. (NYSE:VST) from $110 to $132, citing the company’s role in using nuclear power to support AI technology. The latest Morning Thoughts post noted that this upgrade highlights the growing connection between energy companies like Vistra Corp. (NYSE:VST) and the expanding AI industry.
“Morgan Stanley raised Vistra to $132 from $110 on nuclear powering AI.”
Vistra Corp. (NYSE:VST) has a strong case for investment, driven by its solid financial results and strategic focus on clean energy. In Q2 2024, Vistra Corp. (NYSE:VST) achieved an impressive EBITDA of $1.2 billion, thanks to rising demand and higher electricity prices. Vistra Corp. (NYSE:VST) is committed to cutting its carbon emissions by 80% by 2030, which aligns with growing regulatory pressures and public demand for cleaner energy sources. Vistra Corp. (NYSE:VST)’s diverse mix of assets, including natural gas and renewable energy, positions it well to take advantage of market fluctuations in energy prices.
As demand for electricity rises, especially with more people shifting to electric vehicles and electric heating, Vistra Corp. (NYSE:VST) is well-equipped to benefit from this trend. Additionally, with a strong financial position, Vistra Corp. (NYSE:VST) is in a good spot to pursue potential mergers and acquisitions, which could further boost its market presence. Vistra Corp. (NYSE:VST) has also been proactive in returning value to shareholders, recently announcing a dividend increase, reflecting its confidence in generating strong cash flow. The completion of new solar projects, which add 1 GW of renewable capacity, highlights Vistra Corp. (NYSE:VST)’s commitment to expanding its clean energy portfolio.
Meridian Hedged Equity Fund stated the following regarding Vistra Corp. (NYSE:VST) in its Q2 2024 investor letter:
“Vistra Corp. (NYSE:VST) is an integrated retail electricity and power generation company with operations across 20 U.S. states and Washington D.C. We identified Vistra as a likely beneficiary of the projected growth of power-hungry data centers, spurred by the rise of generative AI, increasing electricity demand, and higher power prices. The stock performed well after the company delivered stronger than expected earnings. Management also provided forward guidance that exceeded investors’ expectations and reaffirmed shareholder-friendly plans for sizable share repurchases through 2025. We trimmed our position in the quarter following the strong performance and continue to see strong long-term prospects for the company.”
5. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Investors: 100
According to the latest Morning Thoughts post, Eli Lilly’s Alzheimer’s drug, donanemab (brand name Kisunla), was approved in Japan for treating early symptomatic Alzheimer’s disease, marking Japan as the second major market to clear the drug after the U.S. in July.
“Eli Lilly ’s donanemab, brand name Kisunla, was approved in Japan for treating early symptomatic Alzheimer’s disease. Japan is the second major market to clear the drug following the U.S. in July.”
Eli Lilly and Company (NYSE:LLY) is an attractive investment choice, driven by solid financial performance and a strong lineup of innovative drugs. In its Q2 2024 earnings report, Eli Lilly and Company (NYSE:LLY) revealed revenue of $8.8 billion, a remarkable 17% increase from the previous year, along with a net income of $2.2 billion. This growth is largely fueled by the success of its diabetes and obesity treatments, especially Mounjaro, which is gaining popularity.
Eli Lilly and Company (NYSE:LLY)’s diverse pipeline includes several promising drug candidates in key areas like oncology, immunology, and neuroscience, and positive results from clinical trials enhance its future potential. Eli Lilly and Company (NYSE:LLY) has also formed strategic partnerships with biotech firms and research institutions, which boost its research and development efforts, allowing for faster introduction of new therapies.
Recent regulatory approvals for expanded uses of existing products further enhance Eli Lilly and Company (NYSE:LLY) market potential. Additionally, Eli Lilly and Company (NYSE:LLY)’s commitment to sustainability and improving access to its medications aligns well with current healthcare trends. With a strong product portfolio and a focus on meeting important medical needs, Eli Lilly and Company (NYSE:LLY) is well-positioned for ongoing growth in the competitive pharmaceutical market.
4. Salesforce.com inc. (NYSE:CRM)
Number of Hedge Fund Investors: 117
Salesforce.com, inc. (NYSE:CRM), a Club name, was upgraded to an “overweight” (buy) rating by Piper Sandler. The analysts believe that Salesforce.com, inc. (NYSE:CRM)’s free cash flow per share could more than double, reaching over $20 by fiscal 2029, compared to $9.65 in fiscal 2024. They also see significant potential in Salesforce.com, inc. (NYSE:CRM)’s artificial intelligence capabilities, which adds to its future growth prospects.
“Club name Salesforce was upgraded to an overweight buy at Piper Sandler. Analysts think free cash flow per share could double to more than $20 by fiscal 2029 from $9.65 in fiscal 2024. They also Like Salesforce’s artificial intelligence optionality.”
Salesforce.com, inc. (NYSE:CRM) is an attractive investment option due to its strong financial performance and commitment to innovation. In its Q2 2024 earnings report, Salesforce.com, inc. (NYSE:CRM) revealed revenue of $8.6 billion, a 10% increase from the previous year, along with a net income of $1.6 billion. This growth reflects effective cost management and a steady demand for its cloud-based customer relationship management (CRM) solutions, with subscription and support revenue rising by 11%.
A major factor driving this success is Salesforce.com, inc. (NYSE:CRM)’s investment in artificial intelligence through its Einstein AI platform, which enhances its products and provides advanced analytics. Recent acquisitions, including a prominent AI-driven analytics firm, have further strengthened its capabilities and competitive position. Additionally, partnerships with major tech companies have expanded its service integration, enhancing the overall customer experience. As businesses increasingly seek efficient CRM solutions in a digital-first world, Salesforce.com, inc. (NYSE:CRM) is well-equipped for ongoing growth, making it a compelling choice for investors.
Parnassus Growth Equity Fund stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q2 2024 investor letter:
“Salesforce, Inc.’s (NYSE:CRM) growth continues to moderate, and investors question its prospect as it relates to AI. We remain confident that the company, which developed the original salesforce automation product and pioneered the SaaS (software as a service) delivery model, is well positioned to capitalize on emerging AI opportunities.”
3. Visa Inc. (NYSE:V)
Number of Hedge Fund Investors: 163
According to the latest Morning Thoughts post, Visa Inc. (NYSE:V) is reportedly facing a potential monopoly lawsuit from the Justice Department over its debit card business, according to a Bloomberg report.
“The Justice Department is planning to file a monopoly lawsuit against Visa over its debit card business, according to a Bloomberg report.”
Despite facing economic uncertainties, Visa Inc. (NYSE:V) has proven to be resilient with its diverse revenue streams and strong brand. As more people and businesses continue to embrace digital payments, Visa Inc. (NYSE:V) is well-positioned for sustained growth and profitability, making it a compelling option for investors.
Visa Inc. (NYSE:V) is still one of the strong investment choices, thanks to its impressive financial results and the ongoing shift toward digital payments. In Q2 2024 earnings report, Visa Inc. (NYSE:V) announced revenue of $7.8 billion, an 11% increase from last year, along with a net income of $4.2 billion, showing solid profitability driven by high transaction volumes. Visa Inc. (NYSE:V) processed 47 billion transactions in the quarter, a 10% rise, highlighting the growing trend of cashless payments among consumers.
Visa Inc. (NYSE:V) is also investing in innovative technologies like contactless payments, digital wallets, and blockchain, which enhance its services and attract more clients. Recently, Visa Inc. (NYSE:V) partnered with various fintech companies to expand its digital payment options, further widening its customer base. Additionally, Visa Inc. (NYSE:V)’s initiatives to promote financial inclusion resonate positively with both consumers and businesses.
Aoris International Fund stated the following regarding Visa Inc. (NYSE:V) in its Q2 2024 investor letter:
“Visa Inc. (NYSE:V) operates the world’s largest payments network, which facilitates the movement of money between merchants, financial institutions, consumers, businesses, and governments.
The company is best known for enabling consumers to make debit and credit card payments. In the year to September 2023, 4.3 billion Visa cardholders made 213 billion transactions on its network, to a total value of US$12.1 trillion.
Compared to cash and cheques, which are still widely used around the world, Visa’s network is a more convenient, secure, and ubiquitous way for consumers to pay. Visa has invested to reduce friction and fraud in the payments experience, to the benefit of both merchants and consumers…” (Click here to read the full text)
2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Investors: 184
According to the latest Morning Thoughts post, Apple Inc. (NASDAQ:AAPL) analysts are offering mixed opinions on the new AI-ready iPhone 16. JPMorgan pointed to the longer lead times as an indicator of strong demand, while Barclays took a more cautious view, citing less optimistic supply chain checks.
“Once again, the Apple analysts were all over the place with JPMorgan saying lead times for the new AI-ready iPhone 16 suggest healthy demand while Barclays sees more muted checks.”
Apple Inc. (NASDAQ:AAPL) presents a strong investment case due to its impressive growth in services, advancements in artificial intelligence (AI), and a solid product lineup, despite facing challenges in China. In Q2 2024, Apple Inc. (NASDAQ:AAPL)’s services segment, which includes the App Store, iCloud, and Apple Music, generated $23.9 billion in revenue, reflecting a 14% increase from the previous year. This growth is driven by over 1 billion paid subscriptions, highlighting a stable, high-margin revenue stream that is a positive sign for Apple Inc. (NASDAQ:AAPL)’s long-term prospects.
Apple Inc. (NASDAQ:AAPL) is also making strides in AI integration, with significant announcements expected at its upcoming WWDC event that could enhance its AI capabilities and provide new growth opportunities. Although iPhone sales fell by 10.5% in Q2 2024 due to tough year-over-year comparisons, demand remains strong in key markets like India and Europe, helping to balance slower sales in China. The launch of upcoming products like the iPhone 16 and Vision Pro is anticipated to further drive growth into 2025.
Additionally,Apple Inc. (NASDAQ:AAPL) is dedicated to returning value to shareholders, distributing $27 billion through dividends and share buybacks in Q2. This is supported by a $110 billion share repurchase program and a 4% increase in dividends.
Parnassus Growth Equity Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
“Apple Inc. (NASDAQ:AAPL) gained but detracted from relative performance due to our underweight. While the company’s overall and iPhone revenues declined year over year, the unveiling of an upgraded iPad Pro and iPad Air boosted investor sentiment. In particular, the introduction of generative AI features allayed concerns that Apple was not keeping pace with competitors.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
According to the latest Morning Thoughts post, Microsoft Corporation (NASDAQ:MSFT) received a rare downgrade from DA Davidson, which shifted its rating to neutral. The analysts expressed concerns about Microsoft Corporation (NASDAQ:MSFT)’s declining lead in AI technology, which could affect its competitive edge.
“There was a rare downgrade of Microsoft as DA Davidson moves to neutral. The analysts warned about a diminishing AI lead for the Club holding.”
Microsoft Corporation (NASDAQ:MSFT)’s positive investment outlook is built on its strong performance in cloud computing, artificial intelligence (AI), and productivity tools, along with continued growth in key business areas. AI integration into products like Azure and Microsoft Corporation (NASDAQ:MSFT) 365 has been a major revenue driver, with Azure showing impressive 30% year-over-year growth, largely thanks to AI services.
In its Q2 2024 earnings report, Microsoft Corporation (NASDAQ:MSFT) delivered outstanding results, with revenues of $62 billion, an 18% increase from the previous year, and a net income of $21.9 billion, reflecting 33% growth. This growth was primarily driven by the intelligent cloud division, which posted a 20% year-over-year increase due to the rising demand for AI-powered solutions. Microsoft Corporation (NASDAQ:MSFT)’s AI innovations, including GitHub Copilot and Microsoft Fabric, boost user productivity by automating complex tasks in applications like Word, Excel, and Teams.
Additionally, Microsoft Corporation (NASDAQ:MSFT)’s investments in AI infrastructure, such as the Maia 100 AI Accelerator and new data centers, underline its commitment to staying competitive in the AI space, improving both efficiency and profitability in the long run. Beyond AI, Microsoft Corporation (NASDAQ:MSFT)’s personal computing and business processes segments also performed well, with 19% and 13% growth, respectively, driven by strong demand for Windows, Surface devices, and Office products.
While we acknowledge the potential of Microsoft Corporation (NASDAQ:MSFT), our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the ones on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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