We recently published an article titled, Jim Cramer’s Latest Stock Picks. In this article, we are going to take a look at where HubSpot, Inc. (NYSE:HUBS) stands against other stock picks by Jim Cramer.
On Monday, Jim Cramer of Mad Money took a closer look at the market’s recent movements, reassuring investors that rising bond yields shouldn’t cause excessive worry. He noted that bond yields have surged significantly since the Federal Reserve cut rates last month, a trend that might seem counterintuitive. Cramer acknowledged that bonds were behind Monday’s “ugly action in the big caps”.
The Dow fell by 344 points, the S&P slipped by 0.18%, while the Nasdaq managed a slight gain of 0.27%. Cramer emphasized that while bonds play a crucial role, they aren’t the sole factor influencing the market’s performance, despite what some may claim. He expressed his frustration with those who panic at the sight of rising interest rates, suggesting that such reactions are misguided. Cramer pointed out that the stock market has experienced a remarkable rally.
“The stock market has had a fabulous run, even as bond yields have crept up almost the entire time. They love to ignore that glaring fact, the bears. Every day is groundhog day for them. They see interest rates go up higher, so they panic themselves and they are trying to panic us.”
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Cramer proceeded to break down the arguments typically made by bond bears, who often use long-term interest rates as a weapon against the Fed. He criticized their simplistic approach, where rising rates are blamed on the Federal Reserve while falling rates somehow earn them credit. According to him, the Fed’s recent decision to cut rates by 50 basis points was necessary.
“… Here’s the simple truth, did the Fed need to do a double rate cut moving 50 basis points and not 25? Yes. Yes, they had to do it if they wanted to be sure that the proverbial plane didn’t crash.”
He firmly stated that Jerome Powell, the Fed Chair, is simply fulfilling his duties responsibly, and those who continuously express skepticism will ultimately be proven wrong. Addressing the notion that a rate cut would trigger inflation, Cramer pointed out that the bond market’s reaction suggests that the initial cut has already sparked fears of inflation resurgence.
He challenged the idea that the effects of a rate cut are immediate, asserting that higher loan rates, particularly for 30-year mortgages, can actually have an anti-inflationary effect, contrary to what some might believe. He highlighted that the most pressing concern in the inflation landscape remains housing.
Cramer also tackled the prevailing belief among bears that stock prices cannot rise if interest rates increase. He dismissed this idea as arbitrary, asserting that we are far from a situation where higher rates would definitively damage the bull market.
“We are nowhere near the point where the bull can be slain by higher, longer rates… Stocks have soared with bond yields at these levels before; in fact, they’ve soared with the 30-year at 5%, they’ve soared with the 30-year at 6%, so let’s stop it with the jeremiads.”
Ultimately, he argued that such fears merely drive investors away from solid companies that are performing well.
Our Methodology
For this article, we compiled a list of 13 stocks that were discussed by Jim Cramer during the lightning round of his episodes of Mad Money on October 18 and 21. 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).
HubSpot, Inc. (NYSE:HUBS)
Number of Hedge Fund Holders: 80
A caller expressed to Cramer that they have been having a hard time figuring out the fair price of HubSpot, Inc. (NYSE:HUBS) stock. Cramer agreed, saying:
“It was really hard. I tell you, it’s really, really hard. I mean, it sells [at] a high multiple. I have preferred Salesforce.com with Agent Force.”
The stock has a forward PE of 69.03, which shows a premium of 185.26% compared to its sector. HubSpot (NYSE:HUBS) is a provider of a cloud-based customer relationship management (CRM) platform designed to support businesses in various aspects of customer engagement. The platform has a range of tools that facilitate marketing automation, sales tracking, customer service management, content management, data unification, and B2B commerce.
A significant aspect of its approach is its redefined concept of inbound marketing. The methodology centers on drawing in potential customers by producing engaging and valuable online content, utilizing channels such as social media and blogs to capture interest and foster relationships. The effectiveness of this strategy is reflected in the company’s growth metrics.
In the second quarter, the company reported revenue of $637 million, marking a 20% increase from the previous year. The adjusted EPS reached $2.03, which is a 40% rise. The growth was due to a 23% increase in customer accounts, bringing the total to 228,045. Management has indicated that the total addressable market (TAM) for the company, valued at $51 billion in 2023, is projected to grow to $77 billion by 2028.
Management has provided guidance for the upcoming quarter, forecasting revenue between $646.0 million and $647.0 million, alongside a non-GAAP operating income of $107.0 million to $108.0 million. Furthermore, HubSpot (NYSE:HUBS) has revised its full-year revenue expectations for 2024, now forecasting between $2.567 billion and $2.573 billion, an increase from the prior estimate of $2.550 billion to $2.560 billion. Non-GAAP net income per share is expected to fall between $7.64 and $7.70, an upward adjustment from the previous forecast of $7.30 to $7.38.
Overall, HUBS ranks 3rd on our list of latest stock picks by Jim Cramer. While we acknowledge the potential of HUBS 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 HUBS 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.