We recently published an article titled Jim Cramer’s Lightning Rounds: 9 Stocks in Focus. In this article, we are going to take a look at where AeroVironment, Inc. (NASDAQ:AVAV) stands against the other stocks.
Jim Cramer, the host of Mad Money, recently expressed his concerns about the uncertain economic outlook for 2025, particularly in relation to corporate earnings and the stock market’s expectations for the upcoming year. He highlighted the important question at the heart of the market’s direction: Will corporate earnings grow as Wall Street is predicting?
According to Cramer, analysts are projecting a 12.2% growth in earnings for the S&P 500 this year, followed by 11.9% growth in 2026 though that is still a long way off. Cramer emphasized that these growth estimates, if realized, would be impressive and one of the main reasons why investors are willing to pay nearly 22 times this year’s earnings for the S&P 500. He added:
“Now, that’s a big premium versus its average forward multiple of 17.7 times earnings over the past decade. Buyers are comfortable paying up because they believe in across-the-board corporate earnings growth of about 12%.”
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Cramer went on to question if the market could even handle a higher growth rate of 24%, which some investors might find acceptable, but he also acknowledged the uncertainty about whether that is achievable. Cramer hopes that earnings growth can be driven by factors such as a strong consumer base, increased capital spending, deregulation, and a rebound in international markets, particularly China, following the pandemic. He added:
“Perhaps starting in 2026, additional tax cuts could provide another easy tailwind for corporate growth but there are also things that could trip us on that path to 12% earnings growth… like tariffs, higher interest rates, or worse, an erosion of consumer spending.”
As earnings season unfolds, Cramer believes that we’ll get a clearer picture of what to expect for 2025. Over the next few weeks, companies will report their fourth-quarter results and offer initial guidance for the full year.
He explained that if any of them issued disappointing forecasts, it could lead to a downward revision of earnings estimates, which would be a significant negative development for the market. He also added that such an outcome could result in investors paying too high a price for stocks relative to their earnings potential, which would be bad news for the averages.
Our Methodology
For this article, we compiled a list of 9 stocks that were discussed by Jim Cramer during the episodes of Mad Money aired on January 10 and 15. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 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).
A rocket on its way to the sky, representing the power of the company’s unmanned aircraft systems.
AeroVironment, Inc. (NASDAQ:AVAV)
Number of Hedge Fund Holders: 22
Cramer noted that AeroVironment, Inc. (NASDAQ:AVAV) offers a significant solution to a Pentagon budget that may be overly inflated yet requires greater efficiency.
“Oh boy, I really like it. It really is the solution, I think, in a lot of ways to a Pentagon budget that may be too bloated but needs to be more effective. I like AVAV and I gotta tell you, Wahid Nawabi, he’s been on the show and every time he’s been a star.”
AeroVironment (NASDAQ:AVAV) designs, develops and supports a range of robotic systems and services, including uncrewed aircraft, ground robots, and loitering munitions, primarily for government agencies and allied governments. Back in July 2024, Cramer responded to a caller asking about the company and said:
“You know what, okay let me give you the bull and the bear on AVAV. My friends who watch the show say, Jim, you don’t understand, their stuff is way too expensive. It needs to come down versus the price of the Iranian drones. All I know is the drones work and therefore it’s a buy.”
Overall AVAV ranks 7th on our list of the stocks featured in Jim Cramer’s Lightning Round. While we acknowledge the potential of AVAV 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 AVAV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.