In this article, we will take a detailed look at Jim Cramer October Calls: Top 10 Stocks.
Jim Cramer in a latest program on CNBC talked about the ills of “complacency” in investing and how sticking to a specific narrative costs investors money. He was criticizing negative analyst reports that keep downgrading stocks.
“We always hear how the bulls are being complacent and ignore downside risk. We almost never hear that the bears are being complacent and missing out on terrific opportunities, which I find to be absurd. Nobody does complacency like the bears. Remember, last night I spent a lot of time talking about how we had a slew of downgrades yesterday that I did not like, and stocks reacting to negative news already. Today, they seem like fortuitous notes that would end up costing you money if you listen to them.”
Cramer said that some analysts like to “take aim” at long-term winners and scare people out of some “amazing gains.” This, Cramer believes, is “downright wrong.” He said that even if investors want to sell a stock based on a downgrade, they should wait for it to “bounce” before pulling the trigger.
For this article we talked about 10 stocks Jim Cramer is talking about during his programs on CNBC. With each company we have mentioned the number of hedge fund investors. 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).
10. Banco Santander SA (NYSE:SAN)
Number of Hedge Fund Investors: 9
When asked about HSBC, Cramer said in a latest program that this stock is just “OK.”
“If you want to own a foreign bank please own Banco Santander SA (BME:SAN), that’s a real good one.”
Banco Santander is a Spanish banking stock with a PE ratio of just under 6. The stock is up about 18% so far this year.
Santander continues to progress towards its medium-term goal of achieving a return on tangible equity (ROTE) between 15% and 17%.
In the first half of the year, the bank’s net interest income (€23.5 billion), fee income (€6.5 billion), and parent company profit (~€6.1 billion) all hit all-time highs, with a cost-to-income ratio of 41.6%, the best in 15 years.
Banco Santander SA (BME:SAN)’s geographic operations often move in different directions. Spain, which accounted for about 25% of first-half earnings, continues to perform well, with net interest income up more than 15% year-over-year to €3.65 billion. Spain’s ROTE exceeded 20%, a roughly seven-point improvement from a year ago. In Brazil, lower interest rates drove a nearly 40% increase in net income to €1.1 billion, with ROTE rising to 15.8%. This offset weaker performance in other areas, such as the U.K., where higher funding costs and mortgage pressures led to a 23% drop in first-half net profit and a ~300 basis point fall in ROTE to around 10.8%.
9. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL)
Number of Hedge Fund Investors: 17
A caller recently told Jim Cramer he was getting ‘tired’ of Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL). Here was Cramer’s response.
“I’d rather double down on Cracker Barrel. I’ve got to tell you, I think Julie Masino (company CEO) is doing a good job.”
Cramer said the stock started to “lift” recently and urged the caller to “please” not sell the stock.
Cracker Barrel’s CEO is working on a ‘five-pillar” program to turn around the company. What are these pillars? The executive explained in detail these pillars in the latest earnings call:
“ Refining the brand, enhancing the menu, evolving the store and guest experience, winning in digital and off-premise and elevating the employee experience.”
Read the entire earnings call transcript to see the performance on these targets.
The latest quarterly results missed estimates on both EPS and revenue. However, there was an increase in revenue. The fiscal year’s outlook remains within analysts’ expectations. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) long-term debt stands at around $476 million, representing a debt-to-EBITDA ratio of 2.7 for the fiscal year.
Restaurant sales were slightly up, with total revenue for the quarter reaching $895 million, a 6.9% increase compared to the prior year. However, this figure was inflated by an extra week in the reporting period, without which sales would have been relatively flat. Restaurant comparable sales edged up 0.4%, but retail sales at its stores dropped 4.2%, reflecting ongoing pressure.
Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) guidance for fiscal 2025 aligns with Wall Street’s expectations. The company anticipates revenue between $3.4 billion and $3.5 billion, similar to fiscal 2024, and projects slight sales growth. Analysts believe with rate cuts now started and the turnaround plan gaining steam, the stock could be fruitful for long-term holders.
8. CAVA Group Inc (NYSE:CAVA)
Number of Hedge Fund Investors: 33
Answering a question about restaurant company CAVA Group Inc (NYSE:CAVA) in a latest program, Jim Cramer said:
“You’ve got to hold Cava. And if it comes down, I want you to be able to buy more. It’s one of the great new concepts that we’ve seen in this market.”
Over the past year CAVA Group Inc (NYSE:CAVA) is up about 300% and the stock is trading at a forward P/E of over 200. What makes this restaurant stock so special?
It’s a fast-casual chain offering Mediterranean-inspired meals and has built its reputation on fresh, healthy ingredients and a mix of dine-in and takeaway options. In the second quarter, the chain reported a 35% rise in revenue year over year, with same-store sales up 14.4%, helped by a 9.5% increase in guest traffic. Its growth is bolstered by moves into new areas, including Chicago.
For 2024, some analysts project the company revenue growth in the mid-twenties percentage range. Management has indicated the possibility of stronger results in the latter half of 2024, which factors into the company’s valuation discussion.
Following strong second-quarter results, CAVA Group Inc (NYSE:CAVA) increased its EBITDA guidance by nearly 10% at the top end, expecting around $115 million. This values the stock at 104 times forward EBITDA. With an expected same-store sales growth range of 8.5% to 9.5% projected by the company, the valuation comes into question. Even McDonald’s hasn’t traded above 60 times free cash flow over the past decade.
Next Century Growth Small Cap Strategy stated the following regarding CAVA Group, Inc. (NYSE:CAVA) in its first quarter 2024 investor letter:
“CAVA Group, Inc. (NYSE:CAVA) is a fast casual restaurant chain serving authentic Mediterranean cuisine, featuring customizable bowls and pitas. CAVA currently owns and operates >300 stores, and the company targets a 15% plus new store growth rate. The intermediate goal is to have 1,000 stores by 2032 with plenty of opportunity to grow beyond that level. The company already delivers solid restaurant level margins >20% and they believe 3-5% same store sales growth is achievable over time. As the business matures, they should be able to leverage G&A expense which should lead to strong earnings growth over many years.”
7. J M Smucker Co (NYSE:SJM)
Number of Hedge Fund Investors: 34
Talking about J M Smucker Co (NYSE:SJM) results in August, Jim Cramer said that the $5.6 billion acquisition of Hostess Brands last year might not be “panning out” as the company said its sweet-baked snacks segment sales were below expectations.
Cramer then alluded to the possible impact of GLP-1 weight loss drugs on J M Smucker Co (NYSE:SJM) sweet snacks business:
“Is it really macro? Is it really declining convenience center, like Celsius would say that?
Or, David, is it the endless pin—the tail on the GLP-1 that no one’s willing to admit?”
Jim Cramer said the company’s results were “not good” and maybe twinkies (JM Smucker’s snack cake) are losing their “allure.”
What were the highlights of these quarterly results? J M Smucker Co (NYSE:SJM) saw an 18% increase in sales year-over-year, but excluding the impact of the Hostess Brands acquisition, divestitures, and foreign exchange fluctuations, sales rose by 1% for the quarter ending July 31.
Sales in the U.S. Retail Coffee segment remained flat compared to the previous year, with segment profit increasing by 1%. Free cash flow was reported at $49.2 million, compared to $67.6 million in the previous year, driven by the decrease in operating cash flow and a reduction in capital expenditures.
Looking forward, J M Smucker Co (NYSE:SJM) expects comparable sales growth of approximately 0.5% to 1.5% for the full year, down from prior guidance of 9.5% to 10.5%. The company anticipates net sales will increase by about 8.5% to 9.5% compared to the previous year. Full-year adjusted earnings per share are projected to range from $9.60 to $10.00, with a midpoint of $9.80, below the consensus estimate of $10.03. Free cash flow for the year is expected to reach $875 million.
Middle Coast Investing stated the following regarding The J. M. Smucker Company (NYSE:SJM) in its Q2 2024 investor letter:
“The J. M. Smucker Company (NYSE:SJM), like Lululemon, is an S&P 500 component and one of the worst 70 or so stocks in the S&P 500 this year. The maker of Jif, Smuckers jams, Uncrustables, Folgers Coffee, and Dunkin Coffee pods has had a bad 10 months since announcing its purchase of Hostess Brands (Twinkies, Hostess Cupcakes, etc.). Hostess was expensive and exposes J.M. Smucker to the risk that the new weight-loss drugs suppress diehard consumers’ appetite for sweets.
I think J.M. Smucker shares have suffered enough, and are at a point where a buy should work. The company is producing ample free cash flow to cover its likely to grow ~4% dividend while also paying down debt, which will improve both its profitability and its stock value. J.M. Smucker’s products and brands are leaders, including Hostess. I don’t think this will be a huge winner, but I do think there’s relatively safe upside here. I should note that another of my idea sources, Thomas Lott, mentioned SJM on Cash Flow Compounders; I had already been looking at the company for a while, but it’s always good to see a smart investor following it.”
6. Nextracker Inc. (NASDAQ:NXT)
Number of Hedge Fund Investors: 39
Jim Cramer was recently asked about Nextracker Inc. (NASDAQ:NXT). Here was his response:
“This acts poorly. It is a club stock, and we had Dan Shugar (company CEO) on, and the stock acts as if it’s going to have a shortfall. Until we see the next quarter, I don’t want to trust it because it’s one of the poorly acting stocks, and I find it incredibly disturbing, incredibly disturbing.”
Jim Cramer has changed his stance on NXT several times.
A few weeks back, Jim Cramer was asked about First Solar. He instead pitched Nextracker Inc. (NXT).
“I know it’s been a big disappointment for Club members but you got to stick with Shugar (company CEO),” he said at that time.
Earlier this year, Jim Cramer had said the following about Nextracker Inc. (NASDAQ:NXT):
“Their technology lets you increase your yield from solar panels. The stock is down. It’s a great opportunity.”
Wall Street is also growing bullish on Nextracker Inc. (NASDAQ:NXT). Earlier this year, Mizuho gave a $59 price target on the stock, saying Nextracker Inc. (NASDAQ:NXT) is positioned to benefit from the demand growth of solar power driven by data centers and AI.
Nextracker Inc. (NASDAQ:NXT) stands to benefit from the secular tailwinds in the industry. According to data from the U.S. Energy Information Administration, solar is expected to grow at a CAGR of 26% over the next five years.
5. Palantir Technologies Inc (NYSE:PLTR)
Number of Hedge Fund Investors: 44
Jim Cramer was asked about Palantir Technologies Inc (NYSE:PLTR) in a program on CNBC. Here was his response:
“Palantir Technologies Inc (NYSE:PLTR) is a cold stock. It is a meme stock. It is a stock that has momentum because individual investors keep piling into it. It is not really even a stock; it is just a barometer of enthusiasm for some business that may or may not be doing well. I wish there were more to it.”
What makes Palantir Technologies Inc (NYSE:PLTR) one of the top AI stocks? Its technologies are actually solving the problems of businesses. Palantir’s data technology Ontology is solving the famous hallucination problem for AI systems, thanks to the company’s years of experience with military and defense systems. Earlier this year at an event with customers, Palantir Technologies Inc (NYSE:PLTR) shared some specifics on how its customers are being able to reduce costs and increase profits due to its artificial intelligence platform (AIP) that was launched about a year ago.
Airbus accelerated A350 production by 33%, BP reduced costs per barrel by 60%, and Jacobs Connect cut power usage by 30%. Panasonic decreased waste by 12%, ESI Group sped up ERP harmonization by 70%, and PG&E reduced transformer ignitions by 65%. Eaton boosted productivity by 25%, while Tyson Foods achieved $200 million in cost savings.
However, Palantir Technologies Inc (NYSE:PLTR) stock’s valuation has been a concern for many.
The stock is trading at about 21.2 times the next 12 months (NTM) revenue. For fiscal year 2024, Palantir expects revenue growth of 24% year-over-year (YoY) to $2.746 billion, with an adjusted operating income of $970 million, representing a 35.3% margin. However, revenue growth is expected to slow over the next two years, with estimates suggesting a 22% YoY growth rate, potentially bringing revenues to around $4 billion by fiscal 2026. If Palantir Technologies Inc (NYSE:PLTR) can improve margins by 100 basis points annually, it would be able to generate about $1.5 billion in adjusted operating income by FY26, with a present value of $1.3 billion when discounted at 8%. Applying an S&P 500-like growth multiple of 2.5 to 2.75 times earnings, Palantir Technologies Inc (NYSE:PLTR) would have a P/E of 46, translating to a price target of $27, significantly down from its current price of $36.
4. Sharkninja Inc (NYSE:SN)
Number of Hedge Fund Investors: 52
When asked about Sharkninja in a program on CNBC, Cramer said:
“These guys execute like you wouldn’t believe. I wish I had bought that for the trust instead of Next Tracker. But I didn’t. Would have, should have, could have. What a stock.”
Sharkninja Inc (NYSE:SN) makes vacuum cleaners, air fryers, multi-cookers, coffee makers, cookware, food preparation appliances, blenders, juicers, etc. The company’s margins have improved significantly over the past few years as it focuses on recurring revenue streams and high-margin items. Sharkninja Inc (NYSE:SN) growth strategy is built on three pillars. First, the company is expanding into new product categories, adding 18 subcategories since 2021, including the Ninja FrostVault coolers and Shark FlexBreeze fans, which offer innovative features at competitive prices. Second, SharkNinja is boosting its presence in existing categories by launching 25 new products annually, 20 of which enhance existing lines like the industry-leading Double Stack XL air fryer. Third, Sharkninja Inc (NYSE:SN) is aggressively expanding internationally, entering six new countries in 2023 and expecting international growth to outpace domestic growth, with strong prospects in regions like Latin America and Europe. With a $120 billion total addressable market, SharkNinja is well-positioned to grow its less than 4% market share through this strategy.
The stock has a PEG ratio of 1.1, significantly lower than the 3.1 average for the Furnishings, Fixtures, & Appliances industry, indicating potential upside as the company grows.
Ave Maria World Equity Fund stated the following regarding SharkNinja, Inc. (NYSE:SN) in its Q2 2024 investor letter:
“Top contributors to performance included SharkNinja, Inc. (NYSE:SN) and Taiwan Semiconductor Manufacturing Company Limited. SharkNinja, Inc. is a global product design and technology company focused on creating solutions that increase efficiency, convenience and enjoyment of consumers’ daily tasks and improve everyday lives. The company has built two billion-dollar brands, Shark and Ninja, and has a proven track record of establishing leadership positions by disrupting numerous household product categories, including cleaning, cooking, food preparation, home entertainment and beauty.”
3. Starbucks Corp (NASDAQ:SBUX)
Number of Hedge Fund Investors: 70
While talking about SBUX new CEO, Cramer said in a latest program:
“I’m a huge fan of this man. He is a turnaround artist, exactly what Starbucks needs right now. The stock starts from $77 to $97 and change since his appointment, with the vast bulk of those gains coming pretty much immediately.”
Cramer then talked about a bear case and bull case pitched by two analyst firms for Starbucks Corp (NASDAQ:SBUX), analyzing both. During this discussion, Cramer commented:
The stock market is all about expectations. If you wait until the turnaround is fully executed, you’re going to miss out on most of the gains. The whole show is predicated upon that concept.
After discussing the bull and bear case in detail, Cramer gave his own take on the stock:
“Look, we’ve got a substantial position in Starbucks Corp (NASDAQ:SBUX) for the charitable trust, and we haven’t sold a share since the news that Brian Niccol was taking over. So clearly, I am siding with the bulls on this one. Again, I don’t expect a strong fourth quarter. The new guy only started three weeks ago. I don’t expect particularly good earnings in 2025 either, although I’m not sure if that means flat earnings growth or a down year.
In the end, though, like the bulls at Bernstein, I’m willing to look through a weak year if it means Starbucks Corp (NASDAQ:SBUX) can come out the other side much stronger. I believe Brian Niccol can pull that off. It doesn’t mean the stock won’t sell off at management’s lower expectation, something I do expect. It means I recommend buying more Starbucks into weakness.”
Brian Niccol, the new SBUX CEO, is known for success in the industry, including leading Taco Bell and Chipotle. His experience in the Quick Service and Fast Casual formats is expected to bring significant value to Starbucks Corp (NASDAQ:SBUX). Niccol also has a history of turning around the digital side of business. Chipotle’s digital orders went up from 10-15% to over 40% during his tenure, which consistently boosted revenues and earnings.
Starbucks Corp (NASDAQ:SBUX) is also adjusting its strategy, focusing on coffee innovation and drive-through formats, similar to Dutch Bros. The new textured coffee drinks are likely to be priced competitively, with Niccol’s expertise in digital marketing expected to play a key role in positioning these offerings effectively, just as he did at Chipotle.
ClearBridge Large Cap Growth Strategy stated the following regarding Starbucks Corporation (NASDAQ:SBUX) in its Q3 2024 investor letter:
“Similarly, we took advantage of a business reset at Starbucks Corporation (NASDAQ:SBUX) in the third quarter to initiate a position in the global coffee retailer. A confluence of factors, including degraded store-level operations and long consumer wait times, consumer fatigue with high prices and weakening engagement among occasional Starbucks customers has led to declining U.S. same-store sales growth. While the path ahead will likely require reinvestment back into the business, there are many merits to Starbucks’ business including its strong brand name and category leading market position. In response to recent challenges, Starbucks has appointed change-agent CEO Brian Niccol, who we know from the Strategy’s ownership of Chipotle Mexican Grill during its turnaround. Niccol has a successful track record of investing in product innovation and fixing execution issues, which we believe are the primary challenges facing Starbucks today. Starbucks represents the kind of successful playbook we have executed on historically – focusing on high-quality businesses and brands while being disciplined around the entry point into investments with attractive risk-reward opportunities.”
2. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 85
Jim Cramer was recently asked about the space infrastructure solutions company Redwire. He instead recommended Tesla as a better buy in this sector for those who want to invest in the industry.
“Everybody wants to be in the space business, but I’ve got to tell you, I don’t. If you want to be in auxiliary space, go with Tesla Inc (NASDAQ:TSLA). He (Elon Musk) owns the market, and I don’t want to go against him.”
There is a lot of hype around Tesla robo taxis but many believe they will not be enough to fix the company’s long-term challenges.
What are these challenges?
Tesla Inc (NASDAQ:TSLA) product lineup is showing signs of stagnation, with over 95% of sales still coming from the Model 3 and Model Y. Meanwhile, competitors are rolling out more advanced models. Even Rivian’s CEO suggested Tesla could be nearing market saturation for these models. According to Reuters, Tesla’s market share in Europe is slipping as legacy automakers like BMW post stronger sales. Chinese competitor BYD is also gaining ground in Europe, despite talk of tariffs.
For Q2 2024, Tesla Inc (NASDAQ:TSLA) saw a 20% year-over-year decline in revenue from China, while BYD reported over 20% growth in the same period. This trend may continue as Chinese automakers release new models, and Tesla could be forced to cut prices to maintain delivery volumes—further pressuring its operating margins in the coming quarters.
Tesla Inc (NASDAQ:TSLA) is overvalued. The company’s consensus earnings-per-share (EPS) estimate for fiscal year ending December 2026 is $4.27, putting its forward price-to-earnings (PE) ratio at 60.2. With Tesla offering price cuts, future EPS growth may fall short of expectations. Investors might consider selling now and waiting for a better re-entry point, or exploring other electric vehicle (EV) options.
ClearBridge Small Cap Value Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q2 2024 investor letter:
“The strength in the stock market adds significantly to that enormous transfer of wealth, which one could argue is good for shareholders. But is it causal? That is, did the stock market do well because CEOs got large stock grants? Are the CEOs just the lucky recipients of a windfall when the market goes up and their employees perform well? Or do they require huge grants to do their jobs that no one else could possibly do as effectively?
Tesla, Inc. (NASDAQ:TSLA), and most of its shareholders, certainly think the latter is true. In 2018, Tesla’s board of directors crafted a pay package for CEO Elon Musk that would award him 12 tranches of 10-year, fixed-price options on 1% of company stock for every $50 billion in market cap the stock added. In total, the options would be for 304 million shares of the company at $23.34 a share. He would receive no other compensation, until or unless the board decided otherwise. Shareholders approved that pay package, and the stock added all that market cap and more, giving Musk the right to buy 10% of the company for $50 billion less than it was worth, adding to his existing 13% stake. Minority shareholders sued, and a court sided with them and expunged the package in January 2024. “The process leading to the approval of Musk’s compensation plan was deeply flawed,” ruled Judge Kathaleen McCormik of the Delaware Court of Chancery as part of a 200-page decision. It seemed like a long-awaited check on excessive compensation to one individual for the achievements of an entire company….” (Click here to read the full article)
1. PayPal Holdings Inc (NASDAQ:PYPL)
Number of Hedge Fund Investors: 87
Talking with CNBC host David Faber in a recent program, Cramer recalled watching an interview of PayPal Holdings Inc (NASDAQ:PYPL) CEO with Faber:
“You had an interview with this guy, Alex Chriss of PayPal. A lot of people didn’t think of it. I watched it, and I said, “Holy cow, this guy is going to energize this company.” He’s going to make new deals, get things flying with Amazon, and maybe he’ll talk about cross-border with China.
Well, David, this is the best performer in the Nasdaq, and it should be. Why? Because a new CEO has come in and really energized this place.”
PayPal Holdings Inc (NASDAQ:PYPL) CEO Alex Chriss is opening new growth horizons for PayPal Holdings Inc (NASDAQ:PYPL) beyond just a way to send or receive money. Thanks to his vast experience with small businesses at Intuit, he is integrating valuable features for customers and merchants to boost small business activity on the platform.
What are these features?
PayPal Holdings Inc (NASDAQ:PYPL) Fastlane offers a seamless checkout experience for customers by storing their data after the first purchase, making future transactions faster. Merchants benefit from higher conversion rates, with tests showing guest conversion jumping from 40-50% to around 80%. Fastlane also speeds up the checkout process by 32%, boosting customer satisfaction. PayPal Holdings Inc (NASDAQ:PYPL) charges merchants a fee for this service, which merchants find worthwhile given the increased conversions.
PayPal Holdings Inc (NASDAQ:PYPL) is also benefiting from its partnerships with companies like Meta, Salesforce, and Adobe. Its PayPal Complete Payments Platform (PPCP) has seen a 40% rise in SMB volume this year, thanks to new merchant integrations.
The company is also launching PayPal Holdings Inc (NASDAQ:PYPL) Ads, a high-margin opportunity that leverages its ecosystem of over 429 million active users. The platform allows merchants to target ads more effectively, increasing their return on investment.
Many don’t know but PayPal has also dabbled into cards, with its debit card offering 5% cashback and integration with Apple Wallet. Recent European regulations also allow PayPal Holdings Inc (NASDAQ:PYPL) to use Apple’s NFC technology for contactless payments, enhancing its reach in international markets, especially in Europe where such payments are popular.
PayPal Holdings Inc (NASDAQ:PYPL) bulls believe the stock’s valuation has become attractive. Its forward P/E ratio of 14 is now 55% lower than its five-year average. Wall Street analysts expect PayPal Holdings Inc (NASDAQ:PYPL) earnings to grow 9.5% next year. If we incorporate PayPal new product growth strategy and catalysts, the stock looks undervalued. PayPal Holdings Inc’s (NASDAQ:PYPL) cash sits at about $14 billion, and long-term debt stands at only $9 billion.
Artisan Value Fund stated the following regarding PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q2 2024 investor letter:
“We made one new purchase in Q2, adding PayPal Holdings, Inc. (NASDAQ:PYPL), a financial technology company that enables digital and mobile payments between consumers and merchants. PayPal has world-class assets. It operates the largest two-sided payment network (ex-China); owns Venmo, the largest peer-to-peer payment network (ex-China); and owns Braintree, the third-largest modern payment service provider (PSP), which is growing at a similar pace to peers, such as Stripe and Adyen. Each of the PSPs are taking share from legacy competitors such as Worldpay, with significant runway left on remaining share gains. As the original e-commerce payment processor with years of history in the marketplace, PayPal has access to a large trove of customer data, a first-class risk engine and embedded consumer and merchant trust. This is difficult for newer peers to replicate without time and investment. Post-COVID, PayPal’s shares have been pressured by intensifying competition, the threat of which has seemingly been exacerbated by prior management missteps. Shares trade for under 14X next year’s expected earnings, which have been reset materially lower over the past year due to depressed expectations. This is an attractive entry point to purchase a stake in a business with above-average—and improving—unit economics and a strong balance sheet. Competent new management is already leaning on the company’s strong financial position to maximize the value of these assets. While we wait for tangible results, we should have plenty of free cash flow pointed back at us in the form of share repurchases.”
While we acknowledge the potential of PayPal Holdings, Inc. (NASDAQ:PYPL), 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 PYPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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