We recently compiled a list titled Jim Cramer’s Latest Watchlist: 10 Stock Picks You Need to Know. In this article, we will look at where Lyft Inc. (NASDAQ:LYFT) stands among other stock picks in Jim Cramer’s latest watchlist.
In a recent episode of Mad Money, Jim Cramer advised investors to hold onto their stocks, anticipating a rebound after the market’s downturn. This advice proved useful as the Dow rose by 484 points or 1.16% and the NASDAQ also climbed by 1.16%, indicating that selling during the market decline was not the best choice.
“Last week, I advised you to hold off on selling everything and just wait, as I believed that once the pain ended, we would see a rebound. The average investor saw gains, with the Dow up 484 points, or 1.16%, and the NASDAQ also climbing 1.16%. While it might not be a full recovery, it shows that selling into Friday’s downturn wasn’t the best strategy.”
Jim Cramer noted that the previous week was tough for economically sensitive and tech stocks, despite a mixed August employment report. This report suggested a balanced economic outlook, not too strong or weak, which initially seemed favorable for those hoping for Federal Reserve rate cuts. Despite this, Wall Street reacted negatively, shifting away from cyclical stocks to more recession-proof sectors like consumer goods and pharmaceuticals, with industries such as industrials and semiconductors being particularly affected.
Cramer observed that recession-proof stocks, such as pharmaceuticals and medical devices, have performed well recently but have seen significant gains, raising concerns about a potential correction.
“Today, recession-proof stocks like pharmaceuticals, drug wholesalers, and medical devices continued to perform well, which is dangerous as these stocks have seen parabolic gains and could be due for a correction.”
He highlighted that historically, when the Federal Reserve is about to cut rates, it signals a shift in investment strategy. With the Fed expected to ease rates soon, Cramer suggests investors consider moving away from recession-proof stocks and look into more cyclical companies that could benefit from economic stimulus. While investing in cyclical stocks during a downturn is challenging, the anticipated rate cuts could make these stocks more attractive. Cramer advises maintaining diversification but being ready to adjust investment strategies based on the economic outlook.
“Historically, when the Fed is about to start cutting rates, we know that it’s time to shift focus. With the Fed leaning towards easing and an expected rate cut next week, it’s time to consider moving away from recession-proof stocks and investing in more cyclical companies. While it’s challenging to buy cyclical stocks during a slowdown, anticipating that the Fed will boost the economy can make them strong investment opportunities. It’s important to maintain diversification but be ready to adjust as needed.”
Our Methodology
This article reviews a recent episode of Jim Cramer’s Mad Money, where he talked about several stocks. From there, we picked ten companies and discussed how hedge funds are investing in them. Finally, we rank these companies from those least owned to those most owned by hedge funds.
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).
Lyft Inc. (NASDAQ:LYFT)
Number of Hedge Fund Investors: 53
Jim Cramer sees value in Lyft, Inc. (NASDAQ:LYFT) despite its recent struggles. He acknowledges that the stock may have been overpriced at one point, as many investors viewed it as part of a secure duopoly with little risk. However, Cramer now believes that Lyft Inc. (NASDAQ:LYFT) is a good buying opportunity because it is currently trading at a lower price, making it more affordable based on its financial metrics.
“What am I missing with Lyft, Inc. (NASDAQ:LYFT) here? Okay, it got overheated. I think people felt that it was a true duopoly like nothing could go wrong. But I’m with you. I think Lyft, Inc. (NASDAQ:LYFT) should be bought here because it’s now inexpensive, believe it or not, on the numbers.”
Lyft Inc. (NASDAQ:LYFT) stands out as a promising investment due to its strong recent performance and positive future outlook. In Q2 2024, Lyft Inc. (NASDAQ:LYFT) exceeded expectations with earnings of $0.24 per share, beating the forecast of $0.19. Revenue jumped by 40.6% from the previous year to $1.435 billion, thanks to a 10.2% increase in active riders, which now number 23.7 million.
Lyft Inc. (NASDAQ:LYFT)’s gross bookings also grew by 17% year-over-year, reaching $4.018 billion. Lyft’s adjusted EBITDA, a measure of profitability, more than doubled from the previous year to $102.9 million, with a solid margin of 2.6%. Additionally, Lyft Inc. (NASDAQ:LYFT) has strengthened its financial position by reducing long-term debt and increasing cash reserves. Looking ahead, Lyft Inc. (NASDAQ:LYFT) forecasts gross bookings between $4.0 and $4.1 billion for Q3 2024 and expects to achieve positive free cash flow for the year.
Overall LYFT ranks 4th on our list. While we acknowledge the potential of LYFT, 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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Disclosure: None. This article was originally published on Insider Monkey.
