In this article, we’ll explore the Top 10 Stocks on Jim Cramer’s Radar.
Jim Cramer often reflects on how he would reform the American education system if it were up to him. According to him, one major change would be to incorporate personal finance education into high school curriculums. He compares this to mandatory health classes that teach practical skills, like dissection, which he finds less relevant compared to financial literacy.
In a recent episode of Mad Money, Cramer emphasizes that understanding money is crucial, and not caring about it doesn’t make someone virtuous; rather, it can lead to real-life problems like poor credit affecting personal and financial decisions, such as buying a car or a house. He notes that while conventional wisdom says money can’t buy happiness, being financially broke is undeniably challenging.
“If everyone in this country lost their minds and decided to turn America into Cramerica, you better believe I would make some changes. So, what would the 18th premiere of Jim Cramer look like? Hey, for those of you who didn’t get that reference, Google is your best friend. But because this is a show about money, let’s stick to the more mainstream elements of the Cramerican regime. For starters, it drives me nuts that we don’t really teach our young people how to handle their money. Would it be so crazy if you had to take a class on personal finance before you could graduate from high school? I mean, like those awkward health classes where they show you how to dissect a frog. I mean, come on!
So, can I just take a moment to speak some words that we all believe but very rarely get to say in polite conversation? Look, money’s important. It’s really important. And caring about the state of your finances does not make you seem like some sort of superficial bourgeois monster. Say you’ve got a lousy credit score and you want to get married—congratulations, you’ve just inflicted your horrible credit on your new spouse. Now neither you nor your partner will be able to qualify to buy a car or a home or perhaps even just get a darn credit card.”
Reflecting on his own experiences, Cramer recalls living in a car while still managing to save for retirement, which he views as a significant accomplishment. He encourages young people to invest early to achieve financial freedom and avoid dependency on their next paycheck. Through the CNBC Investing Club, he aims to guide young investors in managing their finances effectively.
“These things matter in life. They say money can’t buy happiness, but I’ve always found that piece of cliche conventional wisdom to be dubious at best. Because, hey, listen, being broke is a major buzzkill, as I know firsthand from the time I spent living in my ’78 Ford Fairmont for six months in California. I wish I had an expert to guide me through all this stuff back then. Although I still put money away for retirement while living in my car, I took it out of my homeowner’s budget.
So let me answer one of the most important questions out there: What the heck should young people do with their money? First, foremost, and always, you need to invest. That’s the only way you’re going to be able to achieve financial freedom. And by freedom, I mean living a life where you’re not totally dependent on the next paycheck. Teaching you how to do this is one of the reasons I actually put so much time and energy into creating the CNBC Investing Club. I’m always thrilled when I see younger members taking an active hand in managing their own money.”
Jim Cramer observes that many people begin saving and investing too late, complicating their financial lives more than necessary as they age. He also notes that younger individuals often feel they have plenty of time, sometimes starting to invest before they’re truly prepared. Cramer believes there are more prudent uses for their money at that stage.
“Too many people start saving and investing too late, making their lives a lot more difficult than they need to be as they get older. But I also know many young people feel that they have all the time in the world. Some start investing before they’re truly ready when there are, in fact, better things for them to do with their money.”
Cramer then offers three key lessons for young investors, especially recent college graduates. First, he stresses the importance of saving money, even if it’s not intuitive. He suggests investing in the stock market as a way to save, which can be more engaging than just keeping money in a savings account or CD. Investing helps keep your money from being spent impulsively because accessing it requires selling stocks.
Second, Cramer advises young investors to embrace higher risk in their portfolios. In their 20s, they can afford to take risks with speculative stocks or options because they have many years to recover from mistakes. In contrast, older investors should adopt more conservative strategies, focusing on safer investments like bonds and utilities. Cramer criticizes the idea of young investors holding a significant percentage of bonds, emphasizing that they should be more aggressive in their investments.
Lastly, Cramer challenges the notion that student loan debt should prevent young people from investing. He notes that student loan interest rates are generally lower than credit card debt and advises starting investments even while managing student loans. He also suggests that delaying student loan payments could be advantageous due to potential future loan forgiveness programs.
“Here’s the bottom line for young people just out of college: investing is a great way to trick yourself into saving money you might otherwise spend. Beyond that, remember when you’re young, you can afford to take a lot more risk with your portfolio. It’s never too soon to start contributing to your 401k or IRA, especially an IRA.”
Our Methodology
This article reviews a recent edition of Jim Cramer’s Morning Thoughts, where he covered various stocks. We highlight ten prominent companies he mentioned and analyze how hedge funds view these stocks. The article ranks these companies based on their level of hedge fund ownership, from the least to the most owned.
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).
Top 10 Stocks on Jim Cramer’s Radar
10. Southwest Airlines Co. (NYSE:LUV)
Number of Hedge Fund Investors: 23
Southwest Airlines Co. (NYSE:LUV)’s stock has risen following two major news events. Activist investor Elliott Management now holds enough shares to call a special meeting, which has boosted investor confidence. Additionally, Evercore ISI upgraded Southwest Airlines Co. (NYSE:LUV) to an outperform rating, citing optimism about the company’s new revenue strategies. Jim Cramer notes that such endorsements can drive stock prices higher by signaling strong future prospects.
“Southwest Airlines shares are getting a lift after a one-two punch of news. Activist investor Elliott Management now owns enough of Southwest stock to call a special meeting, Reuters reported. Meanwhile, Evercore ISI upgraded the stock to a buy-equivalent outperform rating, citing optimism on Southwest’s new revenue initiatives, among other reasons.”
Southwest Airlines Co. (NYSE:LUV) is an appealing investment due to its strong market position and financial stability. As a leading domestic carrier in the U.S., Southwest Airlines Co. (NYSE:LUV) operates a large network of over 100 destinations, benefiting from its low-cost operations and point-to-point network to maintain a significant market share. The airline’s solid balance sheet, featuring minimal debt, provides a safety net during economic downturns, while its disciplined cost management, including fuel hedging, helps it remain profitable even in tough times.
With air travel demand rebounding post-pandemic, Southwest Airlines Co. (NYSE:LUV) is well-positioned to capitalize on increased passenger traffic. Southwest Airlines Co. (NYSE:LUV)’s focus on leisure travel, which has recovered faster than business travel, along with its expanding route network, is likely to drive additional revenue growth. Moreover, Southwest Airlines Co. (NYSE:LUV)’s history of returning value to shareholders through share buybacks and dividends is expected to continue as its financial performance improves, making it attractive to income-focused investors.
Southwest Airlines Co. (NYSE:LUV)’s operational efficiency, characterized by fast turnaround times and high aircraft utilization, boosts its profitability. Southwest Airlines Co. (NYSE:LUV)’s commitment to customer satisfaction, demonstrated by its no-frills approach, free checked bags, and lack of change fees, fosters strong customer loyalty and sets it apart from competitors.
9. Novartis AG (NYSE:NVS)
Number of Hedge Fund Investors: 30
Jefferies has downgraded Novartis AG (NYSE:NVS)’s stock from buy to hold after a 20% increase in its price this year. Analysts still have a positive long-term outlook for Novartis AG (NYSE:NVS), but they think it will take until next year for Novartis’ upcoming drug approvals and launches to attract investor attention. Jim Cramer points out that while the downgrade reflects a short-term view, it doesn’t change the overall positive expectations for Novartis AG (NYSE:NVS)’s future performance.
“Jefferies downgraded Novartis to hold from buy after the pharmaceutical stock’s 20% year-to-date run. While analysts still like its long-term outlook, they believe it will take time next year for Novartis’ next batch of approvals and launches to get the attention of investors.”
Novartis AG (NYSE:NVS) is an attractive investment due to its strong drug pipeline and focus on growth areas. Novartis AG (NYSE:NVS) is developing several promising treatments, especially in oncology, immunology, and gene therapy. Key drugs like Kisqali for breast cancer and Zolgensma for spinal muscular atrophy are expected to significantly boost revenue. To sharpen its focus on high-margin products, Novartis AG (NYSE:NVS) is selling off non-core assets, including its generics division, Sandoz. This strategy aims to enhance shareholder value by concentrating on its more profitable medicines.
Financially, Novartis AG (NYSE:NVS) shows robust performance with a solid balance sheet and strong cash flow, which supports ongoing investments in research and development, as well as strategic acquisitions. Novartis AG (NYSE:NVS) has a good track record of rewarding shareholders through dividends and share buybacks, making it appealing to income-focused investors. With an expanding global presence, particularly in emerging markets, Novartis AG (NYSE:NVS) is well-positioned in key therapeutic areas like oncology, cardiology, and ophthalmology.
Additionally, Novartis AG (NYSE:NVS) is investing in advanced technologies such as digital health, artificial intelligence, and data analytics to improve drug development and patient outcomes. These innovations are expected to enhance efficiency, increase the success rate of clinical trials, and support personalized medicine, setting the stage for sustained long-term growth.
Aristotle Capital International Equity Strategy stated the following regarding Novartis AG (NYSE:NVS) in its Q2 2024 investor letter:
“We have been investors in the Swiss pharmaceutical company Novartis AG (NYSE:NVS) for over a decade, having first purchased shares in 2011. During our holding period, the company has undergone significant changes. Vasant (“Vas”) Narasimhan was promoted to CEO in 2018 and, we believe, has positively influenced the company’s culture and helped shift the business more toward innovative medicines.
Examples include the sale of Novartis’s consumer (over-the-counter) joint venture; the divestiture of its vaccines and animal health businesses; the spinoff of Alcon, a global leader in the treatment of eye diseases and eye conditions (also an International Equity holding); and most recently, the spinoff of generics manufacturer Sandoz. As part of its portfolio transformation, Novartis has been able to improve its margins and gain share of branded pharmaceuticals. With many catalysts having neared completion, we decided to sell Novartis to fund the purchase of what we believe is a more optimal investment in Roche.”
8. Rivian Automotive Inc. (NASDAQ:RIVN)
Number of Hedge Fund Investors: 37
Jim Cramer believes Rivian Automotive Inc. (NASDAQ:RIVN) is a strong long-term investment because its products are impressive. While having a well-funded partner is a positive sign for Rivian Automotive Inc. (NASDAQ:RIVN)’s stability, Cramer advises that this doesn’t automatically mean you should buy the company right now. Instead, he suggests holding onto it rather than selling, as Rivian Automotive Inc. (NASDAQ:RIVN)’s continued presence in the market is a key factor to consider.
” I think Rivian is a great long-term stock. Why? Because the actual product is so fabulous that the last thing I want to do is write these guys off. Now that they have a deep-pocketed partner, does that mean you should own the stock? No. It means that you shouldn’t sell the stock necessarily, but it means the company’s sticking around, and that’s what really matters.”
Rivian Automotive Inc. (NASDAQ:RIVN) is a promising investment due to its successful launch of the R1T electric pickup truck and R1S electric SUV, which have been well-received for their performance and unique features. These vehicles, designed for adventure and outdoor use, give Rivian Automotive Inc. (NASDAQ:RIVN) a strong position in the EV market. Rivian Automotive Inc. (NASDAQ:RIVN) benefits from strategic partnerships, including a significant deal with Amazon.com, Inc. (NASDAQ:AMZN) for 100,000 electric delivery vans and an investment from Ford Motor Company (NYSE:F). These partnerships strengthen Rivian Automotive Inc. (NASDAQ:RIVN)’s market position and financial stability.
Additionally, Rivian Automotive Inc. (NASDAQ:RIVN) is expanding production with its facility in Normal, Illinois, and plans to build a second U.S. factory to meet high demand and boost revenue. Rivian Automotive Inc. (NASDAQ:RIVN)’s early entry into the electric pickup and SUV markets provides a competitive advantage as the global shift toward electric vehicles grows.
Meridian Hedged Equity Fund stated the following regarding Rivian Automotive, Inc. (NASDAQ:RIVN) in its first quarter 2024 investor letter:
“Rivian Automotive, Inc. (NASDAQ:RIVN) is a US-based manufacturer of electric vehicles, namely the R1T pickup truck and R1S SUV. They also have exposure to the commercial vehicle market with their electric delivery vans (EDVs) that are sold to companies like Amazon. The company has faced challenges amid the broader slowdown in electric vehicle demand and rising interest rates.
This has contributed to Rivian underperforming expectations over the past few quarters. Rivian has also incurred losses as it continues to invest in the development of its products and manufacturing capabilities. We own Rivian in a hedged structure, which provides a significant margin of safety. Despite the near[1]term challenges, several factors provide optimism that Rivian can emerge as a long-term winner in the EV market. Rivian’s balance sheet is strong, with a substantial cash position that enables the company to continue investing in its growth and navigate through the current economic headwinds.
Rivian is also unveiling the R2, which is a smaller and more affordable EV platform that will open the company’s products to a wider customer base. Lastly, Rivian’s investment in the enhancement of its production capabilities should improve the company’s manufacturing efficiency and drive a path to profitability. We continue to hold the company in a hedged structure.”
7. The Boeing Company (NYSE:BA)
Number of Hedge Fund Investors: 42
Wells Fargo has downgraded The Boeing Company (NYSE:BA) to a sell-equivalent rating. Analysts believe that The Boeing Company (NYSE:BA)’s free cash flow per share might peak by 2027 due to high plane development costs, which could also lead to the need for a dilutive equity raise. Jim Cramer notes that it’s important for analysts to address The Boeing Company (NYSE:BA)’s cash flow issues as they work through these challenges.
“Wells Fargo downgraded Boeing to a sell-equivalent underweight rating. The analysts say Boeing’s free cash flow per share could peak by 2027, as plane development costs offset additional product growth, and suggest that the troubled company may need to do a dilutive equity raise. It’s good to see analysts start dealing with Boeing’s weaker cash flow problem.”
The Boeing Company (NYSE:BA) is a strong investment choice as the aerospace industry recovers from the pandemic and global air travel demand increases. The Boeing Company (NYSE:BA) is well-positioned with a robust backlog of orders for its 737 MAX and 787 Dreamliner models, which are expected to benefit from rising passenger traffic. The Boeing Company (NYSE:BA)’s extensive product range and dominant market position, alongside its defense and space division, offer stability and diversification.
The Boeing Company (NYSE:BA) has improved its operations and cost management, enhancing profitability as demand for new, fuel-efficient aircraft grows. With a projected need for over 41,000 new airplanes worth about $7 trillion in the next 20 years and a potential return of shareholder value through dividends and buybacks, The Boeing Company (NYSE:BA) is well-placed for long-term growth and investor appeal.
6. Dollar General Corp. (NYSE:DG)
Number of Hedge Fund Investors: 42
Goldman Sachs has removed Dollar General Corp. (NYSE:DG) from its Americans Conviction List, and Barclays has reduced its price target for the stock from $154 to $102. This follows Dollar General Corp. (NYSE:DG)’s recent cut to its full-year guidance, indicating serious challenges for the discount retailer. Jim Cramer believes that Walmart Inc. (NYSE:WMT)’s strong performance is contributing to Dollar General Corp. (NYSE:DG)’s difficulties.
“Goldman Sachs pulled Dollar General from its so-called Americans Conviction List, while Barclays slashed its price target on the stock to $102 from $154. Just a really bad situation for the discount retailer, which cut its full-year guidance last week. I think Walmart’s success is partly to blame for Dollar General’s struggles.”
Dollar General Corp. (NYSE:DG) is an appealing investment due to its resilient business model and strong performance in both robust and challenging economic conditions. As a leading discount retailer, Dollar General Corp. (NYSE:DG) attracts value-conscious consumers by offering a wide range of affordable essentials. During economic downturns, Dollar General Corp. (NYSE:DG)’s focus on low-cost products drives increased foot traffic and sales as consumers seek to save money.
Dollar General Corp. (NYSE:DG)’s extensive network of over 19,000 stores across 47 states and its ongoing expansion into underserved rural and suburban areas give it a competitive edge and boost market penetration. Dollar General Corp. (NYSE:DG)’s strong financial performance, marked by steady revenue growth, solid margins, and robust cash flow, reflects its efficient operations and cost management.
Investments in digital and e-commerce, such as the DG Pickup service and the DG Fresh program, enhance customer convenience and position Dollar General Corp. (NYSE:DG) to benefit from the growing trend of online shopping. Dollar General Corp. (NYSE:DG)’s defensive nature makes it particularly attractive during economic uncertainty, as its focus on essential, low-cost products remains appealing when consumer budgets tighten.
Artisan Value Fund stated the following regarding Dollar General Corporation (NYSE:DG) in its fourth quarter 2023 investor letter:
“Our biggest full-year detractors included energy holdings Schlumberger and EOG and 2023 purchases Baxter International and Dollar General Corporation (NYSE:DG). Dollar General, a discount retail chain in the US, has dealt with a few struggles. The retailer had previously benefited from COVID stimulus checks, reflected in the bump it experienced in revenues and margins.
However, the effects have worn off, and its core consumer has been hurt by inflation, stiffer economic conditions, lower tax refunds and reduced SNAP benefits. Margins are also under pressure due to labor costs, shrink and markdowns. Some of the issues are likely self-inflicted. After years of focusing on store growth to drive the top line, store standards have suffered. Addressing store standards is needed to turn around flagging traffic, comps and customer satisfaction. On the positive side, discount retail due to its trade-down feature tends to be a defensive business during economic slowdowns.
Dollar General has a strong market position and faces less competition than other discounters due to its largely rural footprint. The business’s value proposition is everyday low prices, a convenient format and proximity. The company has leverage due to capital expenditures, but interest coverage of ~9X is strong. From a valuation perspective, the froth from the pandemic, when it traded in the low- to mid-twenties, is gone. So, we aren’t paying for margin upside or store growth. Those would be bonuses. If the company can continue to grow revenues, generate cash flow and buy back stock, we still see a path to success.”
5. GE HealthCare Technologies Inc. (NASDAQ:CHNG)
Number of Hedge Fund Investors: 49
Redburn Atlantic has raised its price target for GE HealthCare Technologies Inc. (NASDAQ:CHNG) from $90 to $105 per share. Analysts note that GE HealthCare Technologies Inc. (NASDAQ:CHNG), known for its MRI and CT machines, is also seeing increased demand for its radiopharmaceutical diagnostics. One such product, Vizamyl, helps detect brain plaques related to Alzheimer’s disease. Jim Cramer highlights that this growing demand for specialized diagnostics is a key factor driving the positive outlook for GE HealthCare Technologies Inc. (NASDAQ:CHNG)’s stock.
“Redburn Atlantic upped its price target on Club name GE Healthcare to $105 a share from $90. Analysts say the company known for its MRI and CT machines also is benefiting from growing demand for radiopharmaceutical diagnostics. One of those products, Vizamyl, is used in detecting the brain plaques long associated with Alzheimer’s disease.”
GE HealthCare Technologies Inc. (NASDAQ:CHNG) is a compelling investment due to its leadership in medical technology and its ability to capitalize on the growing demand for advanced healthcare solutions. As a prominent player in imaging, diagnostic, and monitoring technologies, GE HealthCare Technologies Inc. (NASDAQ:CHNG)’s expertise and established brand position it well to benefit from the global increase in healthcare spending, driven by aging populations and rising chronic disease prevalence.
GE HealthCare Technologies Inc. (NASDAQ:CHNG)’s commitment to innovation, particularly in integrating artificial intelligence (AI) and data analytics into its medical devices, enhances diagnostic accuracy and operational efficiency. This focus on cutting-edge technology, such as AI-driven imaging solutions, supports higher adoption rates and positions GE HealthCare Technologies Inc. (NASDAQ:CHNG) at the forefront of digital health and personalized medicine. Strategic partnerships and global expansion further strengthen GE HealthCare Technologies Inc. (NASDAQ:CHNG)’s market position.
4. MongoDB Inc. (NASDAQ:MDB)
Number of Hedge Fund Investors: 54
Crisis has been averted for MongoDB Inc. (NASDAQ:MDB). Citi has increased its price target for MongoDB Inc. (NASDAQ:MDB)’s stock from $350 to $400 per share following an upgrade in its guidance. Analysts believe that the challenges MongoDB Inc. (NASDAQ:MDB) faced in the first quarter, which caused a significant drop in the stock price in late May, now seem like a minor issue. Jim Cramer notes that the improved guidance and positive earnings report indicate MongoDB Inc. (NASDAQ:MDB)’s recovery and potential for future growth.
“Crisis averted at MongoDB. Citi lifted its price target on the database software maker’s stock to $400 a share from $350 after it boosted its guidance late Thursday. Analysts argue the earnings report that showed its first-quarter challenges, which sent the stock cratering in late May, were just a blip.”
MongoDB Inc. (NASDAQ:MDB) is an attractive investment opportunity due to its leadership in the NoSQL database market and its ability to meet the growing demand for scalable and flexible data management solutions. MongoDB Inc. (NASDAQ:MDB)’s flagship product, MongoDB Atlas, has experienced rapid adoption thanks to its capability to handle large volumes of unstructured data and its suitability for cloud-based and data-driven operations.
MongoDB Inc. (NASDAQ:MDB)’s impressive revenue growth, with a projected increase of over 30% for fiscal 2024, reflects strong demand for MongoDB Atlas and its recurring revenue model. MongoDB Inc. (NASDAQ:MDB)’s continuous innovation, including features like multi-cloud clusters and integrated search, broadens its appeal across various industries, enhancing its market position.
The increasing adoption of MongoDB Inc. (NASDAQ:MDB)’s platform by major enterprises and its strategic partnerships with leading cloud providers such as AWS, Microsoft Azure, and Google Cloud further bolster its growth prospects. These alliances expand MongoDB Inc. (NASDAQ:MDB)’s market reach and integrate its solutions into a broader ecosystem, driving higher adoption rates.
ClearBridge All Cap Growth Strategy stated the following regarding MongoDB, Inc. (NASDAQ:MDB) in its first quarter 2024 investor letter:
“During the first quarter, we initiated a new position in MongoDB, Inc. (NASDAQ:MDB), in the IT sector. The company offers a leading modern database platform that handles all data types and is geared toward modern Internet applications, which constitute the bulk of new workloads. Database is one of the largest and fastest-growing software segments, and we believe it is early innings in the company’s ability to penetrate this market. MongoDB is actively expanding its potential market by adding ancillary capabilities like vector search for AI applications, streaming and real-time data analytics. The company reached non-GAAP profitability in 2022, and we see significant room for improved margins as revenue scales.”
3. Berkshire Hathaway (NYSE:BRK-B)
Number of Hedge Fund Investors: 120
Jim Cramer refers to Berkshire Hathaway (NYSE:BRK-B) as an “up stock,” a term he uses to describe stocks that consistently perform well. He recalls that Leon Cooperman first introduced him to Berkshire Hathaway (NYSE:BRK-B) in the early 1980s, and the stock has continued to show positive performance since then. Cramer highlights that Berkshire Hathaway (NYSE:BRK-B) remains a strong investment choice today.
“Berkshire Hathaway is what I call an up stock. It’s been that way since Leon Cooperman first told me about it in 1983 and ’84, and it remains an up stock even today.”
Berkshire Hathaway (NYSE:BRK-B) is a strong investment due to its diverse portfolio and financial stability. Berkshire Hathaway (NYSE:BRK-B) spans various sectors, including insurance with GEICO, energy through Berkshire Hathaway Energy, railroads with BNSF Railway, and consumer goods like Duracell and See’s Candies. This broad diversification reduces risk and provides steady revenue streams, allowing Berkshire Hathaway (NYSE:BRK-B) to thrive in different economic conditions.
Its insurance operations generate significant cash flow, which Warren Buffett uses for strategic investments, supporting long-term growth. Berkshire Hathaway (NYSE:BRK-B)’s investment portfolio includes major stakes in top-performing companies like Apple Inc. (NASDAQ:AAPL) and The Coca-Cola Company (NYSE:KO), enhancing stability and growth potential. Warren Buffett’s proven investment strategy, combined with a strong balance sheet and over $100 billion in cash, gives Berkshire Hathaway (NYSE:BRK-B) flexibility for acquisitions and share buybacks.
2. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Investors: 165
Morgan Stanley suggests that Alphabet Inc. (NASDAQ:GOOG) shares might be stuck in a trading range due to uncertainty surrounding the antitrust case that recently went against Google’s parent company. As a result, the analysts have reduced their price target for Alphabet Inc. (NASDAQ:GOOG) from $205 to $190 per share but still maintain a buy-equivalent rating. Jim Cramer notes that despite these challenges, Alphabet Inc. (NASDAQ:GOOG) remains a stock held by the CNBC Investing Club.
“Alphabet shares may be rangebound due to uncertainty around remedies in the antitrust case that went against Google’s parent company last month, according to Morgan Stanley. The analysts lowered their price target on the stock to $190 a share from $205 as a result, but kept their buy-equivalent rating. We own Alphabet for the CNBC Investing Club.”
Alphabet Inc. (NASDAQ:GOOG) has demonstrated a strong financial performance in its latest earnings report. Revenue reached $84.7 billion, marking a 14% increase from the previous year, driven primarily by notable successes in its Search and Cloud segments. Alphabet Inc. (NASDAQ:GOOG)’s operating income soared to $27.4 billion, and net income rose to $23.6 billion, highlighting substantial improvements. The Search business, which generated $73.9 billion in revenue, was particularly strong. YouTube advertising also showed growth, with a 13% increase to $8.66 billion.
The Cloud segment excelled, achieving a 28.8% revenue increase to $10.35 billion and surpassing $1 billion in quarterly operating profit for the first time. Alphabet Inc. (NASDAQ:GOOG)’s ongoing investment in artificial intelligence (AI) is expected to boost its growth further. Alphabet Inc. (NASDAQ:GOOG)’s focus on integrating AI into its Search and Cloud services positions it well for future success as AI adoption expands. Despite some challenges in the Network ads segment, Alphabet Inc. (NASDAQ:GOOG)’s robust performance in Search, Cloud, and AI suggests continued growth and profitability.
Baron Fifth Avenue Growth Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter:
“We also added to Alphabet Inc. (NASDAQ:GOOG). The company reported solid financial results with first quarter revenue growth of 15% year-over-year, driven by 14% growth in search, 21% growth in YouTube, and 28% growth in cloud (which accelerated from 26% growth in the fourth quarter). The company has also increased its cost discipline efforts, which drove operating margins to 31.6% (compared to 25% in the first quarter of 2023). With regards to GenAI, while we are cognizant of the potential risks to the dominance of search, we believe that on the range of outcomes, Alphabet remains well positioned through its massive user distribution (9 products with over 1 billion users each), long-standing AI research labs (DeepMind and Google Brain), top AI talent, a solid cloud computing division in Google Cloud, and deep pockets for investing in AI.
During the quarter, Alphabet also held its annual I/O conference, where it provided an update on its efforts in AI including: Gemini is now used by 1.5 million developers; model quality is expanding rapidly (e.g., context window is now 2 million tokens of length); the new genomics model, Alphafold 3 can predict structures of molecules and potentially accelerate drug discovery; new TPU6 AI chips has shown a 4.7 times improvement in compute performance compared to the prior generation; and Gemini for workspace is showing early data on a 30% increase in user productivity. Alphabet also has real value in assets such as Waymo, which are not factored into valuation today (and are potentially included at a negative valuation as they currently generate losses, hurting EPS). We continue to believe that the current valuation of Alphabet presents an attractive risk/reward for long-term owners of the business and have therefore increased our position.”
1. Amazon.com Inc. (NASDAQ:AMZN)
Number of Hedge Fund Investors: 308
JMP Securities has raised its price target for Amazon.com Inc. (NASDAQ:AMZN), thanks to positive expectations about its advertising business. Analysts believe that Amazon.com Inc. (NASDAQ:AMZN)’s ad platform, combined with its extensive customer data, makes it a compelling choice for advertisers, potentially drawing more marketing dollars compared to its competitors. Jim Cramer points out that this boost in the price target reflects confidence in Amazon.com Inc. (NASDAQ:AMZN)’s ability to leverage its advertising strengths effectively.
“Amazon landed a price-target bump at JMP Securities, rooted in analysts’ optimism about its advertising business. Amazon’s integrated ad platform combined with its trove of customer data is an attractive pairing that should attract more marketing dollars relative to peers, analysts argued.”
Amazon.com Inc. (NASDAQ:AMZN) has shown a strong recovery in its Q2 2024 earnings report. Revenue reached $134 billion, marking an 11% increase from the previous year, while net income surged to $6.7 billion, a turnaround from a $2 billion loss in the same quarter of 2022. This improvement is largely attributed to a 19% rise in revenue from Amazon Web Services (AWS), highlighting Amazon.com Inc. (NASDAQ:AMZN)’s leading role in the cloud and AI markets.
Amazon.com Inc. (NASDAQ:AMZN)’s investments in generative AI and warehouse automation are expected to support long-term growth, particularly in high-margin sectors. Despite some challenges in retail due to cautious consumer spending, Amazon.com Inc. (NASDAQ:AMZN) is making strategic enhancements to its delivery network and shopping experience. These efforts are likely to improve profit margins and boost market share. Analysts are optimistic about Amazon.com Inc. (NASDAQ:AMZN)’s future, anticipating continued growth in AWS and favorable outlooks from major financial institutions like JPMorgan and Wedbush.
While we acknowledge the potential of Amazon.com Inc. (NASDAQ:AMZN), 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 the ones on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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