On Tuesday, Jim Cramer, the host of Mad Money, analyzed the day’s market activity, shedding light on why some Big Tech stocks gained traction while others struggled. He pointed out that investors are increasingly concerned about the broader economic effects of rising bond yields. Cramer began by questioning how a day could unfold where recent market leaders lose their momentum, prompting money managers to shift back to established favorites like Big Tech.
Cramer acknowledged his growing worry about the bond market, noting that since the Federal Reserve cut rates last month, bond prices have plummeted.
“… Ever since the Fed cut rates last month, right, bond prices have plunged. Bond yields, meaning longer-term interest rates, have soared. Not supposed to happen. But when it does happen, money managers reach for the companies that simply aren’t impacted by the change in the 10-year, the 20-year, or the 30-year US Treasurys.”
Cramer likened Wall Street to Chinatown, suggesting that sometimes, it defies easy understanding. He remarked that people seem to abandon the market’s recent winners in a snap as if discarding hot fries. He then explained that the day’s disappointing earnings reports created confusion, as they didn’t align with the prevailing narrative of strong employment alongside rate cuts.
“See, this morning we got a series of earnings reports that just didn’t add up. They didn’t fit the thesis. They were disappointing. They don’t jive with a rather benign moment when we have the Fed cutting rates, yet employment remains strong. When we get these problematic quarters, several in one day, I might add, money managers default back to the tried and true growth stories that we all know and love. Yes, Titans of Tech. You know what? These managers can’t help themselves. They feel they have to rotate out of what was hot at one point and into something else that’s not that impacted by the big rate-cut cycle.”
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He addressed the “alleged earnings disappointment,” clarifying that he chose the term “alleged” because he holds these companies in high regard and does not want to undermine their reputations. Cramer stated that when the 10-year Treasury yields rise, money flows back to these tech giants. He noted that on days like Tuesday, large investors often become apprehensive about cyclical stocks, with concerns about various sectors like aerospace, home building, and even auto parts.
He reassured viewers that this phenomenon is familiar; it has been a recurring theme for over a decade. Cramer suggested that money could just as easily rotate back to previous favorites, but it might take a day or two for that to happen, which shows the volatility of the current market environment.
Concluding, Cramer noted that Big Tech experienced a significant resurgence. He remarked:
“But the bottom line, Big Tech made a big comeback today because of the bond market, not anything to do with the stocks themselves. So, keep in mind that the pause in the rally is temporary, even as you should still own some of the Magnificent Seven for diversification.”
Jim Cramer is Talking About These 12 Stocks
Our Methodology
For this article, we compiled a list of 12 stocks that were discussed by Jim Cramer during his episode of Mad Money on October 22. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
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).
Jim Cramer is Talking About These 12 Stocks
12. Genuine Parts Company (NYSE:GPC)
Number of Hedge Fund Holders: 31
Cramer shed light on how Genuine Parts Company’s (NYSE:GPC) earnings call led to the sell-off. Here’s what he said:
“Now we all love the autos. GM had a good number, by the way, but what about the auto parts place? Shouldn’t they be good? Don’t we like Genuine Parts? We should, but not when it whiffs horribly, a gigantic miss. You look at the thing, you think, we have so many old cars on the road, you need to fix ’em, but Genuine Parts, it seems like a can’t-miss story. Then you listen to the conference call of Genuine Parts and CEO Will Stengel tells us, Genuine’s getting slammed by conditions in Europe and their industrial business. Well, most people didn’t even know there is an industrial business in Europe… So once again, get me outta that one pronto and that’s how Genuine Parts stock gets pummeled for a 21% loss.”
Genuine Parts (NYSE:GPC) is a distributor of automotive and industrial replacement parts, catering to a range of markets that include hybrid and electric vehicles, trucks, and various industrial equipment. The company also provides essential repair and assembly services. Recently, the company has faced challenges which can be seen in its third-quarter earnings report released on October 22.
Although the company narrowly surpassed consensus revenue estimates as its revenue rose 2.5% to $5.97 billion, its profits fell short of expectations, reporting $226.6 million. CEO Will Stengel addressed the disappointing results, attributing them primarily to ongoing market difficulties in Europe and a decline in the industrial sector. He acknowledged that the current external environment poses challenges for the remainder of 2024, yet expressed optimism about future improvements stemming from both immediate actions and long-term investments.
During Genuine Parts’ (NYSE:GPC) earnings call, executives highlighted significant “market headwinds” impacting sales in Europe and Australia. These factors contributed to a revised outlook for the fiscal year, with EPS now projected between $6.60 and $6.80, significantly lower than the previous range of $8.55 to $8.75. Additionally, the company adjusted its total sales growth forecast, now expecting an increase of only 2% instead of the previously estimated 3%.
11. PulteGroup, Inc. (NYSE:PHM)
Number of Hedge Fund Holders: 35
Cramer commented on PulteGroup, Inc.’s (NYSE:PHM) offering of incentives to reel in home buyers. Here’s what he had to say:
“Then we go to Pulte Group. Yeah, the big home builder reported what looked like a Jim-dandy quarter, but when you look underneath, you see newfound “rot”, incentives, that was the point. Pulte has to now offer incentives for people to buy homes. The conference call bummed people out because CFO, Bob O’Shaughnessy said, and I’m gonna quote here, ‘We expect incentives to remain elevated for at least the remainder of the year’.
Huh? What incentives? Aren’t the home builders reeling in the money? We don’t need no stinking incentives. Ah, but then again, long rates just keep running higher and that means mortgage rates are moving up. With mortgage rates expensive again, something has to give and it might be the price of a house and that’s how Pulte plunged more than 7% today.”
PulteGroup (NYSE:PHM) is a leading homebuilder in the United States, engaged in acquiring and developing land for residential purposes and constructing a variety of housing options. In its third-quarter earnings report released on October 22, the company reported a net income of $698 million, which shows a rise from $639 million in the same period last year. The growth translated to earnings of $3.35 per share, up from $2.90 per share in the prior year.
Home Sale revenues also saw a significant boost, climbing 12% to reach $4.3 billion. The company reported net new orders totaling 7,031 homes during the quarter, indicating strong demand in the housing market. At the close of the third quarter, its backlog comprised 12,089 homes valued at $7.7 billion.
However, PulteGroup (NYSE:PHM) faced challenges related to increased incentive costs, which impacted its profit margins. Incentives offered to buyers during the quarter reached 7%, marking a sequential increase of 70 basis points from the previous quarter. Management acknowledged that competitive market conditions necessitated higher incentives to maintain sales momentum and efficiently manage assets.
10. Nucor Corporation (NYSE:NUE)
Number of Hedge Fund Holders: 40
Cramer called Nucor Corporation (NYSE:NUE) “America’s best steel company”. Expounding on what happened after the company released its earnings on October 21, he said:
“Last night, Nucor reported and the market was not impressed. The stock ended up plunging $10 or 6.5% today. That’s unfortunate because this company’s a great bellwether for the whole material sector. And after what we heard last night, it’s clearly gonna take some time before these stocks can rebound after one rate cut. Now, Nucor’s results weren’t exactly a surprise. The company issues rough earnings guidance about two weeks before the end of every quarter.
That was a month ago. And this time, management pre-announced some disappointing earnings per share figures.
Wall Street was looking for a buck 73 per share, the management said it was expecting more than a dollar, maybe a dollar 30, a dollar 40 thanks to lower pricing caused by weak demand from a host of end markets like autos, farm equipment, and household appliances. But a funny thing happened here after that pre-announcement, it didn’t seem to matter to the stock. See, even before we got those numbers, Nucor’s stock had already fallen 34% from its highs in April to its lows in mid-September.”
Cramer highlighted how investors were “already circling on this one over a month ago, betting that it was ready to bottom”. He went on to say:
“And of course, it’s not a coincidence that the stock bottomed on September 11 right before the Fed leaked that we’ll likely get a 50 basis point double rate cut. Once we heard that, the stock caught fire because who cares about the current quarter when the Fed’s about to become our best friend again? Everybody knows the industrials benefit from rate cuts so they were willing to look past the weakness in the third quarter. But apparently they’re actually not willing to look past weakness in the fourth quarter, which is what we heard about last night and that’s what torpedoed the stock today.
It’s kind of a rude awakening. See, the headline numbers for the reporting quarter were slightly better than expected after last month’s hideous pre-announcement. Even though Nucor’s business is down substantially year-over-year, thanks in large part to weak pricing, they still delivered a clean revenue beat.”
Cramer mentioned that Nucor (NYSE:NUE) reported earnings of $1.49 per diluted share, 9 cents more than the high end of the pre-announcement, while the figure was 2 cents lower than what the analysts were expecting.
“Those third-quarter numbers were awful in absolute terms though, but everybody knew they’d be bad and nobody let that bother them for the past month. So what changed here? The outlook. Unfortunately, Nucor’s guidance for the current quarter was quite disappointing. Management made some grim comments on the conference call.
For the fourth quarter especially, Nucor said that its unadjusted earnings per share will be down from the third quarter they just reported, definitely less than a buck o five [$1.05] per share. Their steel mills in their finished product business are being hit by weaker volumes and lower average selling prices. Still, the only bright spot is the raw materials side of the business where volumes and pricing are stable while costs are coming down but it’s not enough to move the needle. What’s going wrong here? Aside from weakness in key end markets like construction, manufacturing, autos, management called out election uncertainty, geopolitical concerns, product delays, tight lending requirements, and elevated levels of imports for certain steel products.”
Calling the above a “parade of horribles”, Cramer went on to say:
“To be fair, Nucor also did call out some potential catalysts that could turn things around like more rate cuts, pent-up demand for residential commercial construction, and an extremely soft landing for the economy.
But there’s a reason they’re potential catalysts and not actual catalysts. It’s because they haven’t happened yet. Through it all, though, Nucor reaffirmed that they’ve been navigating economic cycles for five decades and emerged stronger every time. And I can tell you, that is definitely true, but it’s also cold comfort if the fourth quarter is gonna be worse than the third quarter.
When Nucor held its conference call this morning, it was a bit of a mixed bag and CEO Leon Topalian’s prepared remarks… I’m gonna quote here ‘The Federal Reserve’s recent actions are a good start, but it will likely take more time, more rate relief, and looser lending conditions before we start to see the flow through effect in the construction, industrial, and consumer durables market that are so impactful to steel demand.’
On the other hand, he called out several markets that do remain quite healthy, including construction related to semiconductor factories, advanced manufacturing facilities, data centers of course, and institutional buildings. Basically, the Fed is Nucor’s friend. But given the nature of the steel business, it takes a few more rate cuts for the friendship to really kind of bond, kick in. Looking into next year and beyond, Topalion pointed to all sorts of things that could turn around things for the steel industry. I agree with him, I think it’ll turn, but that doesn’t necessarily mean that stock’s worth buying on weakness right now.
Ultimately, there’s a reason the stock plunged 6.5% today. I don’t think Nucor is really doing anything wrong at all. I was just hoping we see more signs that materials space is turning, especially after all the bottom calls we heard over the past couple of months. But the turn clearly isn’t here yet. We probably need more rate cuts before I know I feel comfortable pounding the table on the steel or the other material stocks.”
Cramer mentioned that he thought it was the right time to buy the stock but has become circumspect after the earnings call.
“Now, if you’re willing to look a bit further in the future then I do think Nucor is worth buying on weakness. However, I’m starting to get a little concerned by this relentless rise in longer-term interest rates ever since the rate cut from the Fed last month. Yesterday we got conflicting messages from the Fed. Mary Daly, president of the San Francisco Fed, she says she doesn’t see a reason to stop cutting rates, but then Minneapolis Fed president Neel Kashkari says he favors a slower pace of rate cuts. He’s currently a non-voting member, still influential.
Personally I’m confident in the Fed. I believe that they’ve tamed inflation. However, we might not get true clarity on the rate hike front or a cut front until after the election. Both candidates have potentially inflationary policies but in different ways and to different extents. Two days after the election, we’ll learn the outcome of the next Fed meeting. Might be worth putting Nucor on hold until we know more, that’s how I’m approaching it. As much as I would like to tell you to dive into Nucor here, because I’ve loved it so long… But after last night’s update, I’m a little less sanguine.”
Cramer said that the weak quarter wasn’t surprising but the guidance was, which makes it harder for him to root for the company presently. He concluded by saying:
“If I had to decide today, I’d still guess that the Fed keeps cutting, rates come down in 2025, and cyclicals like Nucor and the rest of the materials stocks can be big winners. But you know what, we don’t have to decide that today. Given that the situation’s uncertain, we can keep watching and gathering information for the next couple of weeks. Won’t be too late to make a decision on Nucor when we know more about where we’re headed. But I am again concerned. I know I was premature in thinking it could bottom today. It didn’t. I gotta wait and see.”
Nucor (NYSE:NUE) manufactures and sells a variety of steel products, serving customers across North America. The company also engages in raw materials production and processing, providing essential materials for steel manufacturing and other industries. During the first 9 months of 2024, the company announced consolidated net earnings of $1.74 billion, or $7.22 per diluted share. This contrasts with consolidated net earnings of $3.74 billion, or $14.83 per diluted share, for the same period in 2023.
9. Kimberly-Clark Corporation (NYSE:KMB)
Number of Hedge Fund Holders: 43
Talking about Kimberly-Clark Corporation’s (NYSE:KMB) recent quarterly earnings results, Cramer said that the problems were one-off. He remarked:
“How about safety? Can’t we huddle in safety right? Is that what you’re supposed to do when things are uncertain? The action in Kimberly-Clark says, apparently not. The maker of Kleenex as well as all sorts of diapers had some one-off problems that hurt the quarter. So the seller’s body slammed the darn thing. If you own it, you wish you were wearing Depends, which by the way are the quintessential Amazon products… I think Kimberly-Clark’s problems really are one-off. The buyers will come back, but not today. Not today, Satan, that’s why the stock closes down 4.5%.”
Kimberly-Clark (NYSE:KMB) is a prominent manufacturer and marketer of personal care and consumer tissue products and has well-known brands like Huggies and Kleenex under its belt. The company’s extensive portfolio includes a variety of items such as disposable hygiene products, facial tissues, paper towels, and professional hygiene solutions.
On October 22, it released its third-quarter results, reporting sales of $5.0 billion, a decrease of 4% from the same period last year. The decline was influenced by negative effects from foreign currency translation and approximately 1% was attributed to the divestiture of the K-C Professional Personal Protective Equipment (PPE) business. Despite these challenges, organic sales saw a slight increase of 1%.
Kimberly-Clark (NYSE:KMB) recorded an operating profit of $1.2 billion for the quarter, benefiting from $565 million in gains related to the PPE business divestiture. Diluted earnings per share were reported at $2.69. For the year-to-date period, cash generated from operations totaled $2.4 billion, an improvement over the $2.3 billion reported the previous year, largely due to stronger operating performance. Additionally, total debt as of September 30, stood at $7.5 billion, a decrease from $8.0 billion as of December 31, 2023.
8. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 85
During the episode of Mad Money, Cramer acknowledged that he left out Tesla, Inc. (NASDAQ:TSLA) for a “good reason”. Referencing his “own it, don’t trade it” philosophy, he said:
“Tesla, eh. It’s a car company so it’s genuinely sensitive to the bond market. No, thank you. They actually have an interest rate concern now that we don’t think about them as a robot company.”
Tesla (NASDAQ:TSLA), renowned for its electric vehicles, is currently facing a difficult landscape in the automotive sector. Recent shifts in consumer preferences show a growing inclination towards more affordable gas-powered vehicles, a trend influenced by economic factors such as higher interest rates. The company released its third-quarter 2024 report on October 23, which illustrated both positive developments and ongoing challenges.
The report indicated an 8% rise in total revenue, reaching nearly $25.2 billion, with significant contributions from the energy generation and storage divisions. However, the company also experienced tightening margins due to competitive pressures and external cost challenges. In terms of vehicle performance, the company achieved an increase in deliveries of the Model 3 and Model Y. Additionally, production of the Cybertruck improved sequentially, marking its first quarter of profitability.
Despite these achievements, Tesla (NASDAQ:TSLA) confronts various hurdles. Automotive gross margins are strained by aggressive pricing strategies and escalating input costs. Furthermore, regulatory investigations into the safety of its Full Self-Driving (FSD) software add another layer of concern. The company recognizes the shift in consumer sentiment and capital cost factors, shaped by broader economic conditions.
7. GE Aerospace (NYSE:GE)
Number of Hedge Fund Holders: 86
GE Aerospace (NYSE:GE) is a favorite of Cramer’s. Talking about the company’s recent earnings report, he said:
“Number one is GE Aerospace… a favorite of mine. Today we learned that there was some weakness in some orders and some lingering supply chain issues when it came to building aircraft engines. Now it wouldn’t be a big deal except the stock was already up 90% for the year as of last night’s close. So people sold first and then asked questions later. They don’t think, Hey, wait a second, GE has years of demand ahead and aerospace is a great secular growth market. No, that takes wisdom, genuine wisdom. And who the heck has time for wisdom when you can just ring the register? And that’s how a fantastic stock like GE Aerospace closes down 9% and no more than that.”
GE Aerospace (NYSE:GE) is involved in the design and production of engines for commercial and military aircraft, along with integrated engine components, electric power systems, and mechanical systems for aircraft. In its third-quarter results, released on October 22, the company reported earnings of $1.15 per share and revenue totaling $8.9 billion. While this earnings figure surpassed expectations by a slight margin, the revenue fell short of the consensus estimate.
The report also highlighted some challenges, particularly regarding the LEAP engines, which are produced through a joint venture with Safran. The LEAP engines serve as the exclusive option for the Boeing 737 MAX and are also available for the Airbus A320 neo family. Due to supply chain issues and delays in aircraft deliveries, GE Aerospace (NYSE:GE) has revised its outlook for LEAP engine deliveries, now expecting a 10% decline in 2024 compared to the previous year.
Initially, management had expected a growth rate of 20% to 25% for LEAP deliveries. Despite these setbacks, the company achieved an increase in services revenue, rising by 10% driven by higher sales of spare parts. The commercial engine and services segment saw an overall revenue growth of 8% year-over-year, although this marked a decline from the 14% growth recorded in the prior quarter. On a positive note, total orders surged by 28% during the quarter, reaching $12.6 billion, indicating a strong demand for its products and services.
6. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 179
Cramer mentioned that NVIDIA Corporation (NASDAQ:NVDA) stock did not see the same gains as some of its Mag 7 peers on Tuesday and went on to talk about Huang’s “sovereign AI” idea.
“NVIDIA didn’t get much love either, but CEO Jensen Huang is headed to India for a fireside chat at an AI conference. Hey, maybe he’ll announce a giant sovereign state contract, something he’s been hinting at. I would own, not trade… Nvidia.”
NVIDIA (NASDAQ:NVDA) has established a commanding presence in the graphics processing unit (GPU) market, significantly driven by its A100 and H100 chipsets. These products have been key contributors to the company’s remarkable revenue and profit growth in recent years. With the introduction of the new Blackwell series GPUs, the company is positioned to strengthen its product lineup even further. CEO Jensen Huang has expressed enthusiasm regarding the overwhelming demand for Blackwell, highlighting the eagerness among many to engage with this innovative technology.
Sovereign AI refers to a nation’s ability to develop artificial intelligence utilizing its own infrastructure, data, workforce, and business networks. It highlights a country’s control over its data and the AI it generates.
During a speech at the World Government Summit in Dubai in June, Huang emphasized the necessity for countries to develop their own artificial intelligence infrastructure to fully harness economic potential while preserving cultural identity. He remarked that NVIDIA (NASDAQ:NVDA) is working to democratize access to AI, enabling rapid advancements in AI computing. Huang stated, “The rest of it is really up to you to take initiative, activate your industry, build the infrastructure, as fast as you can.”
In October, Huang joined the King of Denmark to unveil the nation’s largest sovereign AI supercomputer, aimed at facilitating advancements in areas such as quantum computing, clean energy, and biotechnology. Named Gefion, after a figure from Danish mythology, this supercomputer is powered by 1,528 NVIDIA H100 Tensor Core GPUs and employs NVIDIA Quantum-2 InfiniBand networking for connectivity.
At a recent NVIDIA AI Summit, Huang also commended India’s progress in artificial intelligence. He noted that over 2,000 AI companies in India are currently part of NVIDIA’s incubation program, alongside more than 100,000 developers trained in AI.
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 184
Cramer mentioned that Apple Inc.’s (NASDAQ:AAPL) stock did not see highs that some of its peers did. He also commented on the latest news about iPhone sales. He said:
“See today we’ve got some negative news about iPhone sales. Not enough to make me wanna sell, but enough to ding the stock. And that wasn’t just analyst reports, you also got a number from Verizon that didn’t jive with the thesis that Apple iPhones are selling well… I would own, not trade Apple.”
Apple (NASDAQ:AAPL), widely recognized for its groundbreaking iPhone, has solidified its reputation as one of the most respected companies in history. Currently, the company is approaching a crucial upgrade cycle, largely driven by innovations in artificial intelligence. However, recent market reactions indicate some caution. Following the third-quarter results from Verizon, the company’s shares experienced a decline.
Analyst Craig Moffett from MoffettNathanson highlighted Verizon’s low upgrade rate of 3.0% for retail postpaid connections, a drop from 3.4% in the same quarter the previous year when the last iPhone was launched.
Moffett pointed out that with only two weeks of iPhone 16 sales included in Verizon’s Q3 data, it is premature to conclude that the upcoming Apple cycle will be smaller than last year. Nonetheless, he noted that this was not an encouraging start. In a similar vein, AT&T CEO John Stankey remarked during his company’s earnings call that initial iPhone sales figures were slightly down compared to the previous year.
On October 23, according to TipRanks, industry analyst Ming-Chi Kuo reported that recent surveys revealed Apple (NASDAQ:AAPL) has reduced its orders for the iPhone 16 by approximately 10 million units for the fourth quarter of 2024 through the first half of 2025. Most of these reductions affected the non-Pro models, leading to a new production estimate of 84 million units for the second half of 2024, down from around 88 million.
Consequently, total iPhone production forecasts for the upcoming quarters have also been adjusted, now projected at about 80 million, 45 million, and 39 million for the fourth quarter of 2024, the first quarter of 2025, and the second quarter of 2025, respectively. While some investors are hopeful that advancements in Apple Intelligence could significantly increase iPhone shipments in the near future, Kuo believes that the recent order reductions indicate such optimistic expectations may not be realized in the immediate future.
4. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 216
Cramer discussed how big companies like Alphabet Inc. (NASDAQ:GOOGL) remained largely unaffected by the events of the bond market and highlighted its advertising capabilities. Here’s what Mad Money’s host had to say:
“They like Google for the same reason they like Amazon and Meta, targeted ads. Referenced again and again as a place to advertise pretty much anything.”
Alphabet (NASDAQ:GOOGL) serves as the holding company established following Google’s restructuring in 2015, with Google recognized primarily for its leading search engine. The company benefits from strong network effects, as the value of its Google Search platform increases for all stakeholders, users, website publishers, and advertisers, as it expands.
According to CEO Sundar Pichai, the introduction of generative AI features has led to greater engagement and satisfaction among users, particularly those aged 18 to 24. The innovation includes AI-driven tools aimed at optimizing advertising profits and automating the creation of media content and advertising campaigns.
As a major player in the digital advertising industry, Alphabet (NASDAQ:GOOGL) sees substantial gains from its successful Google Search platform, which accounted for more than half of the company’s $84.7 billion in revenue during the second quarter. Each of the primary operating segments contributed to these strong results, but the resurgence in advertising revenue had a significant impact after a challenging period in recent years. Google advertising rose by 11% year over year, which points to a recovery in its advertising business.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 219
Discussing Meta Platforms, Inc. (NASDAQ:META), Cramer remarked on its products and advertising business. Here’s what he said:
“Rates don’t matter all that much to Microsoft or Meta or Google. Neither they nor their clients need to borrow large sums of money so the bond markets are irrelevant to them… You go to Meta, which also has an amazing balance sheet and extraordinary demand for its products. Their AI Ray-Bans are a huge hit, but that’s barely a drop in the ocean because they can make so much money from the targeted advertising business and they will.”
Meta (NASDAQ:META) is a prominent technology company dedicated to creating products that enable users to connect and share across various devices. The company’s financial performance has been strong, largely fueled by the ongoing transition to digital advertising. As the global digital advertising market is projected to grow from $366 billion in 2022 to over $1 trillion by 2030, the company is well-positioned to take advantage of this significant expansion.
User growth has played a crucial role in its success. In the second quarter, the number of individuals engaging with Meta’s suite of social media platforms increased by 7%, reaching 3.27 billion and the ad revenue reached a whopping $38.3 billion.
Additionally, Meta (NASDAQ:META) is advancing its AI initiatives, currently with the development of Llama 4. CEO Mark Zuckerberg has indicated that this upcoming model could set a new standard for the industry when it launches next year. The company is also working to deploy 600,000 GPUs by the end of 2024, which shows a commitment to its long-term AI goals. The company has a strong balance sheet as it reported cash, cash equivalents, and marketable securities totaling $58.08 billion, alongside a free cash flow of $10.90 billion, as of June 30.
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Cramer praised Microsoft Corporation (NASDAQ:MSFT) and pointed out the tech giant’s solid balance sheet and customer base.
“Rates don’t matter all that much to Microsoft or Meta or Google. Neither they nor their clients need to borrow large sums of money so the bond markets are irrelevant to them… Microsoft started going up right at the opening bell. Here’s a company with [an] amazing balance sheet, selling indispensable products to 100 millions of people around the world. People who pay on time regardless of how the economy’s doing.”
Microsoft Corporation (NASDAQ:MSFT) operates with a diversified business model that spans enterprise software, consumer applications, cloud services, gaming, social media, and hardware products. Its broad portfolio has contributed to significant financial success, as highlighted in the fiscal 2024 fourth quarter, which ended on June 30. During this period, the company reported revenue of $64.7 billion and operating income of $27.9 billion, reflecting a 15% increase in both metrics compared to the previous year.
The strong growth was because of several key factors, including heightened demand for Microsoft 365, the company’s suite of office collaboration and productivity tools. Additionally, the revenue generated by Azure, its cloud computing platform, experienced impressive growth, further boosting overall performance. The company also noted a 9% increase in revenue from search and news advertising, illustrating its strength in the digital advertising space.
For the full fiscal year, Microsoft Corporation (NASDAQ:MSFT) achieved a significant milestone as cash flow from operations exceeded $100 billion for the first time, reaching $119 billion. This financial strength allowed the company to return over $34 billion to shareholders throughout the fiscal year.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Cramer mentioned investors’ fluctuating sentiments about Amazon.com, Inc.’s (NASDAQ:AMZN) earnings. Here’s what he had to say:
“How about Amazon, which is closing on its all-time high again, just over 10 points from here. Even as its last quarter was hated, suddenly though, Amazon’s loved for its consistency, long-term consistency I guess.”
Amazon.com (NASDAQ:AMZN) is a renowned global technology company specializing in online retail, advertising, and subscription services. Despite its prominent position in the market, the company faced challenges following its second-quarter results in late July, with shares in response to weaker-than-expected revenue growth of 10%.
While Amazon Web Services (AWS) continued to show strong performance with a 19% increase in sales, contributing $26.3 billion, this growth was not sufficient to offset a modest 7% rise in international revenue and a 9% gain in its domestic e-commerce sector. Recent optimism surrounding the stock should be noted and it can largely be attributed to the ongoing success of its AWS platform, which serves as a driver of the company’s overall profitability.
On October 22, The Fly reported that BMO Capital kept an Outperform rating and $230 price target on Amazon.com (NASDAQ:AMZN). The firm increased its forecast for Q3 AWS Cloud growth to 20% from 19%. Additionally, BMO has raised its FY24 earnings per share estimate for the company by 4 cents to $4.53 and its FY25 estimate by 3 cents to $5.30. The firm anticipates potential acceleration for the company, driven by the normalization of optimization efforts in the latter half of 2024 and the ongoing adoption of Bedrock.
However, BMO also cautions that the consumer trade-down effect is a significant variable for the second half of the year, noting a mixed outlook where strong back-to-school spending may be offset by declines in beauty, electronics, and home goods.
While we acknowledge the potential of Amazon.com, Inc. (NASDAQ:AMZN) 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 AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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