We recently published a list of 11 Best NYSE Penny Stocks to Buy Right Now. In this article, we are going to take a look at where Eventbrite Inc. (NYSE:EB) stands against other best NYSE penny stocks to buy right now.
Small and medium-sized companies are the most affected by the direction of the economy and interest rates. With the US Federal Reserve cutting interest rates and the economy steering into a soft landing, the focus is slowly shifting towards penny stocks that remain well-positioned to be supercharged by improving macroeconomics.
It’s time to go all in into the small-cap rotation play after years of market domination by large-cap stocks. That’s the sentiment echoed by Citi U.S. equity strategist Scott Chronert, who believes small-cap stocks offer an affordable way of investing in value and are well-poised to generate long-term value.
READ ALSO: 10 Worst-Performing Growth Stocks in 2024 and 8 Best Micro Cap Stocks to Buy According to Analysts.
“Combined, investors could be paying a much lower multiple for a similar growth profile going forward,” he wrote. “Given post-pandemic peculiarities, the lack of a real cycle, and secular trends that support leaders, we still want to be owners of some Large Cap winners, but increasingly view Small/Mid Cap as an attractive alternative to the other 493. Said differently, we are more comfortable dipping down cap in search of fundamental winners and thematic expressions.”
Although small and mid-cap stocks have delivered above-average, double-digit gains over the past year, they look increasingly attractive amid a monetary policy change. The US Federal Reserve, commencing its monetary easing cycle, is making it easier for such companies to borrow money to expand their businesses. With their long-term prospects looking positive, investors are slowly taking note of their depressed valuation.
Similarly, the Russell 2000 ETF, which consists mainly of small and medium-cap companies, is up by 13% compared to a 22% gain for the S&P 500, affirming the massive room for gains among penny stocks.
“We continue to believe that these stocks have been unfairly punished (or ignored) given what we have viewed as a mismatch between the fundamental underpinnings and the group’s relative performance, and nothing has changed in that regard. It is only a matter of time before the fortunes of this group take a turn for the better” now that central bankers are cutting rates. Wrote BMO analysts’ research notes to investors.
Likewise, there is an influx of investments into small-cap exchange-traded funds amid growing optimism that the companies are fairly valued with tremendous upside potential. According to ETF journalist Dave Nadig in an interview on CNBC, money inflow into penny stocks might not necessarily be a rotation from winning growth trades. Instead, it is a diversification play as the focus shifts to getting broader exposure heading into year-end. The diversification strategy is part of a broader strategy of absorbing volatility
″ [Investors] are now, for the first time in ages, buying value, buying some of these defensive sectors, buying small caps. But they haven’t stopped buying the other things as well,” Nadig said in an interview on CNBC ETF Edge. “I think this is money coming in from that giant bucket of money markets that we know is sitting out there.”
Given that large-cap stocks continue to outperform the overall market, the focus on penny stocks is mostly on companies that are profitable. Given that 40% of the small-cap companies in the S&P 500 are unprofitable, investors are turning their attention to ETFs that exclude unprofitable companies as they optimize their return amid the current Bull Run.
The focus on penny stocks of profitable companies stems from the historical thesis that small caps often outperform large caps whenever the economy is expanding amid solid macroeconomics. Consequently, small-cap companies with exposure to emerging technologies such as artificial intelligence are becoming some of the most sought-after owing to their tremendous upside potential.
The best NYSE penny stocks to buy right now also stand out owing to their attractive valuations and the fact that they have a narrow expected earnings growth gap compared to large-cap companies. The fact that investors have to pay a much lower multiple for the penny stocks also makes them stand out on the risk-reward front.
Our Methodology
We used the Finviz screener to find stocks lists on the New York Stock Exchange that are trading below $5, as of October 31. We then selected stocks that analysts are bullish on and expect to generate significant long-term value due to their solid underlying fundamentals. Finally, we ranked the stocks in ascending order based on the number of hedge funds that hold 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).
A solitary event creator, immersed in the company’s experience technology platform.
Eventbrite Inc. (NYSE:EB)
Price as of October 31: $3.16
Number of Hedge Fund Holders: 25
Eventbrite Inc. (NYSE:EB) is a company best known for offering a platform for event management and ticketing services. The company has only started to pick up its pieces after facing significant challenges at the height of the COVID-19 pandemic, whereby there were movement restrictions. While the stock is down by about 70% from its all-time highs, its prospects are showing signs of improvement amid an increased desire for live experiences and reduced inflation that is fueling ticket sales.
Last year alone, Eventbrite Inc. (NYSE:EB) sold over 300 million tickets for over five million events while inflation was still high. With inflation dropping significantly below the 4% threshold in major economies, the company is on the cusp of booming business on ticket sales. The second quarter report was the clearest indicator that the company is back to robust growth.
Net sales were up by 7% in the quarter to $84.6 million despite gross ticket sales dropping from $890 million a year ago in the same quarter to $840 million. While Eventbrite Inc. (NYSE:EB) has lowered its revenue outlook for the entire year, it has taken the necessary steps to reduce its operating expenses, which is one of the ways of bolstering profit margins. Consequently, it is laying off 11% of its workforce, cutting 8% of its staff in the first half of last year.
Additionally, Eventbrite Inc. (NYSE:EB) has moved to capitalize on the growing market for live events despite a dip in ticket volume in the second quarter. It also remains in a robust cash position, allowing it to invest in technology as it focuses on long-term profitability. Given that the company’s revenue has grown by over 18% over the past 12 months, it remains in a phase of robust growth, which underscores why it is one of the best NYSE penny stocks to buy right now.
Overall, EB ranks 10th on our list of best NYSE penny stocks to buy right now. While we acknowledge the potential of EB as an investment, our conviction lies in the belief that 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 EB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock
Disclosure: None. This article is originally published at Insider Monkey.
