We recently published a list of 10 Best Packaging Stocks to Buy According to Analysts. In this article, we are going to take a look at where O-I Glass, Inc. (NYSE:OI) stands against other best packaging stocks to buy according to analysts.
An Overview of the Global Packaging Market
According to a report by Mordor Intelligence, the packaging market size is estimated at $1.14 trillion in 2024 and is expected to grow to $1.38 trillion by 2029, growing at a compound annual growth rate of 3.89% during the forecast period (2024-2029).
Region-wise, Asia Pacific is the fastest-growing region in the packaging market, with plastic packaging being widely utilized in the region. India and China’s food and beverage markets are contributing to this utilization. Japan is another major consumer of paper-based products in diverse sectors.
Market trends reflect that paper and paperboard packaging products are to witness the highest growth. There has been an increasing demand for eco-friendly packaging with minimal environmental footprint. In this regard, paper-based solutions such as bags, pouches, and cartons, have driven a surge in sustainable packaging adoption. The demand for eco-friendly paper packaging solutions is also coming from the environmental regulations on non-biodegradable and non-recyclable packaging solutions as well as the rising trend of online retail.
The perception of customers regarding paper and paperboard packaging being more environmentally friendly than plastic packaging is also shaping this demand. Gen Z is especially more inclined towards the rising sustainability trend. Oisin Hanrahan, the CEO and co-founder of Keychain, described the prevalent Gen Z consumer preferences by stating:
“Gen Z has a unique preference for conscious consumption when compared to any generation, which provides a huge opportunity for brands to win them over with sustainable ingredients, packaging, and practices”
Is Generative AI the Future of the Packaging Industry?
As reported by McKinsey & Company, the packaging industry has historically been behind other sectors in terms of adopting new technologies such as traditional AI and machine learning. However, a recent survey of over 200 paper and packaging executives across substrates and geographies revealed that executives recognize the potential of generative AI to drive business value. While approximately 95% of the respondents believed their companies should invest in gen AI, 77% said that their companies have moderate to strong intentions to use the technology in the near future.
In regards to the current adoption of gen AI, 24% of respondents reported that they either have launched or are developing generative AI tools or solutions in their area of work. A majority of those who had implemented gen AI saw its generated impacts as meeting or exceeding expectations. Survey respondents also expect generative AI to enable revenue growth and cost savings. They believed that opportunities to use generative AI are present across the packaging and paper value chain. The technology can also help generate new ideas through intellectual property and patent analytics, give customer analysis, and create customization options. Gen AI is expected to have the most profound impact on the commercial side of the industry for instance increasing sales team productivity, optimizing marketing spend, and improving pricing capabilities for companies.
While generative AI has an obvious advantage over traditional Artificial Intelligence since it can deal with messier data and offers easier adoption because of its accessible user interface, players in the paper and packaging industry are still subject to challenges. These challenges include limited access to data and to a modern data tech stack, gen AI’s use causing intellectual property or privacy concerns, limited understanding of use cases to drive value in commercial activities, associated costs, and resistance to change among others.
Our Methodology
In order to compile a list of the 10 best packaging stocks to buy according to analysts, we first used a stock screener to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest average upside potential. The 10 best packaging stocks to buy according to analysts have been arranged in ascending order of their average upside potential, as of November 1.
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 factory floor with industrial line machinery operating, producing glass containers.
O-I Glass, Inc. (NYSE:OI)
Average Upside Potential: 43.50%
Number of Hedge Fund Holders: 27
O-I Glass, Inc. (NYSE:OI) serves as a global leader in glass packaging. The firm is one of the producers of the most sustainable packaging, the glass container. It was founded by the inventor of the automatic bottle-making machine, Michael J. Owens. The firm’s vision revolves around becoming the most innovative, sustainable, and chosen supplier of brand-building packaging solutions.
OI has innovated and transformed how glass packaging is made and sold for over 100 years. It serves some of the most trusted brands such as Nestlé, Unilever, Coca-Cola, PepsiCo, and Kraft Heinz among others. The firm boasts a privileged footprint across the Americas and the EU, with deep manufacturing and technical capabilities. Furthermore, long-term megatrends tend to favor glass which remains well-positioned to win in the new green economy. Glass is the preferred choice for premium and health-oriented products.
The third quarter performance of O-I Glass, Inc. (NYSE:OI) was not like the strong prior-year quarter. The firm believes that its 2024 performance doesn’t reflect what it can potentially deliver while results are expected to improve in 2025 and beyond for which the Fit to Win program is in place. The first phase of O-I’s Fit to Win initiative is being implemented and is expected to drive at least $300 million of annualized savings by 2027. OI intends to reduce central operating costs, shift accountability to local markets, as well as eliminate unprofitable and redundant capacity to increase network utilization and drive productivity.
In conclusion, the firm expects a solid recovery in 2025 driven by its Fit to Win initiative benefits. Apart from the increased competitiveness expected as a result of this program, the firm has strong customer relationships which depict its service-level capabilities as well as a bright future for Glass to benefit from. Thus, O-I Glass, Inc. (NYSE:OI) ranks among the best packaging stocks to buy according to analysts with its average upside potential of 43.50%.
Overall, OI ranks 1st on our list of best packaging stocks to buy according to analysts. While we acknowledge the potential of OI as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than OI 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 at Insider Monkey.