We recently compiled a list of 10 Best Stocks Under $15 To Buy Now. In this article, we will look at where Lyft, Inc. (NASDAQ:LYFT) ranks among the best stocks under $15.
While September is usually the toughest month for the stock market, it is delivering solid results this time. Stocks are soaring after the Federal Reserve announced a half-point cut this month to bring interest rates between 4.75% and 5%. This has led to the market racking up records again as investors look to move from riskier investments to stocks, reported CNN.
The broader market marked its 42nd record-high close in 2024 this past Thursday. The index, which has a history of September dips, is on track for a 1.3% gain this month, which will take its quarterly advance close to 5%. The Dow Jones Industrial Average surged 0.4% a day later to reach its 32nd record high for the year after investors received encouraging economic data regarding inflation, which has raised hopes for further interest rate cuts.
According to the Personal Consumption Expenditures Price Index, inflation rose 2.2% in August this year, which marked the lowest inflation rate in the United States since February 2021. Overall inflation in the country is crawling back to the Federal Reserve’s goal of a two percent annual rate. The easing of consumer prices is expected to result in further interest rate cuts to prevent a spike in unemployment rates, say economic experts. This has raised hopes among investors about the American economy returning to solid footing.
However, Fundstrat Global Advisors’ co-founder, Tom Lee, in an interview with CNBC this week cautioned against diving into stocks after interest rate cuts, citing election uncertainty.
This Fed cut cycle I think is setting the stage for markets to be really strong over the next one month or next three months. But, what the stocks do between now and let’s say election day, I think is still a lot of uncertainty. And that’s the reason why I’m a little hesitant for investors to dive in.
In the weeks leading to the cuts, Lee, who is generally bullish on the stock market, warned investors that stocks could fall 10% during the coming eight weeks amid nervousness around the presidential elections, and added that the dip should viewed as a buying opportunity.
Liz Young Thomas, the head of investment strategy at SoFi, has also acknowledged the risk of stock market volatility associated with the presidential elections. While talking to the Business Insider, she noted how thinner trading volumes between June and August, when traders are on summer vacations, drive strong market performance, and the market turns volatile when stock activity picks up after traders return to their desks in September. According to Young Thomas, a two percent shift in share prices has become the norm in September. However, during the election year, volatility peaks around mid-October instead of September, and the market returns to normalcy after the results are announced.
Methodology
We scanned Insider Monkey’s database of 912 hedge funds for the second quarter of 2024 to look for stocks with a share price of under $15 and then picked the top 10 companies with the highest number of hedge funds having stakes in them. We ranked them in ascending order of hedge fund holders in each company. In the case where two or more stocks had the same number of hedge fund holders, we used market capitalization as a tie-breaker and placed the stock having a greater market capitalization at a higher ranking.
Why are we interested in 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 Holders: 53
Share Price as of the close of September 27: $12.83
Lyft, Inc. (NASDAQ:LYFT) is a major American provider of Transportation-as-a-Service in the United States and Canada. The company offers ride-sharing, car and bike rentals, food delivery, and other related services through its Lytf app.
During the second quarter of 2024, the company reported that it had achieved GAAP profitability for the first time in its history, with a net income of $5 million. This robust result was driven by a 15% year-over-year increase in the total number of rides and a 10% growth in active riders compared to the same period in 2023 as the company supported 205 million rides and engaged with 23.7 million active users during the quarter.
Revenue in Q2 totaled $1.4 billion, up 40% from last year. Gross bookings crossed the $4 billion mark, representing a 17% increase, fueled by strong ride growth due to competitive pricing and successful marketing. Lyft, Inc. (NASDAQ:LYFT)’s media division also performed well during the quarter and saw its revenue grow 70% year-over-year, as the company signed deals with 44 new brands. The company expects this momentum to continue during the second half of the year and has reiterated its initial guidance for FY24.
The company does face fierce competition, however, from rival firms such as Uber which can result in severe price wars leading to reduced margins. Rising costs of insurance can also squeeze margins. During Q2, the company’s cost of revenue grew 37% in contrast to last year and was mainly driven by higher insurance costs. Despite these challenges, the overall outlook for Lyft, Inc. (NASDAQ:LYFT) is encouraging.
The management expects gross bookings in Q3 to be between $4 billion and $4.1 billion, up 13-15% from the same period last year. The company has also improved its financial position and it is now on track to achieve positive free cash flow for the full year after solid progress made in Q2, during which it generated $256 million in free cash flow. Lyft, Inc. (NASDAQ:LYFT) has also re-entered into its strategic partnership with Disney as its rideshare provider at Disney World Resort. The agreement also includes a media buy, which is projected to contribute to the company’s growth.
Street analysts anticipate a 24% increase in the company’s share price over the coming months. Moreover, according to Insider Monkey’s database for Q2 2024, 53 hedge funds have investments in Lyft, Inc. (NASDAQ:LYFT), making it one of the best stocks under $15 to buy now.
Overall LYFT ranks 3rd on our list of the best stocks under $15. While we acknowledge the potential of LYFT 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 LYFT 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 is originally published on Insider Monkey.
