We recently compiled a list of the 10 Best Fast-Growing Penny Stocks to Buy Now. In this article, we are going to take a look at where Vivid Seats Inc. (NASDAQ:SEAT) stands against the fast-growing penny stocks.
Rate Cuts Are Around the Corner
September tends to be the worst month for the stock market, however 2024 might just be an outlier in history. Considering that the economy is doing worse than what was estimated earlier, the Fed needs to decide on a cut rate soon. We discussed this earlier in our article about the 10 Most Buzzing Stocks To Buy Now, here’s an excerpt from it:
“Investors are concerned that the FED will be slower to lower interest rates while inflation remains sticky and GDP growth begins to cool. Stovall expects three 25-basis point cuts this year, followed by another four in 2025. He thinks that while a 50 basis point cut is rare since it only ever happened twice, in 2001 and then 2007, it is still not unlikely given that the economy is worse than expected.
According to Stovall, investors need to be prepared for this increased volatility as the market digests the Fed’s actions and the potential impact on the economy. The market will likely remain uncertain until the Fed can find the right balance between slowing down the economy and stopping inflation, without causing a recession.”
Michael Feroli, JPMorgan’s chief US economist, recently discussed whether a 50 basis point cut is an overreaction. Feroli advocates for the Fed to implement a 50 basis point rate cut during its upcoming meeting on September 17-18, suggesting that this move would help return the economy to a neutral stance.
He thinks that although the economy is softening rather than collapsing, the Fed should not wait long enough for it to collapse before implementing a 50 basis point cut. The call for a significant rate cut comes in light of recent labor market data, and disappointing job growth, coupled with a downward revision of July’s figures, intensifying speculation regarding the Fed’s monetary policy direction.
Fed officials have been cautious in providing specific guidance regarding the size of the anticipated rate cut. Fed Chair Jerome Powell indicated that the central bank has largely succeeded in controlling inflation through high interest rates but expressed concerns about further weakening in the job market.
However, George Lagarias, chief economist at Forvis Mazars, believes that a 50 basis point rate cut by Fed this month could pose considerable risks to financial markets, and send a misleading signal about imminent recession risk. He thinks that unemployment alone does not translate into a recession, especially considering that China continues to deflate the global economy.
He advocates for a more measured approach, suggesting a quarter-point reduction instead of a 50 basis point cut, which he believes could imply a sense of urgency that may become a self-fulfilling prophecy. Lagarias says that unless there is a significant market disturbance, there is no cause for alarm, and a drastic cut could mislead both the markets and the economy.
According to CME’s FedWatch tool, 30% of market participants are expecting a 50 basis points cut while 70% are expecting a 25 basis point cut. Lagarias’ caution reflects a broader sentiment among economists who advise against hasty decisions that could destabilize financial markets.
Rate cuts are good for business and several small companies that have been under pressure due to higher rates could soar as interest rates come down.
Methodology
To compile our list, we used a stock screener to screen for companies that are trading under $5 and have grown their earnings by double digits over the past year. We made an initial list of 25 stocks and then selected the ones that have grown their revenue by at least 30% over the past 3 years and are also popular among elite hedge funds and analysts. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
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 line of eager ticket buyers outside a theatre on opening night showing the demand for live events.
Vivid Seats Inc. (NASDAQ:SEAT)
3-Year Revenue CAGR: 79.58%
Year-over-Year Revenue CAGR: 19.65%
Share Price as of September 5: $4.63
Number of Hedge Fund Holders: 24
Vivid Seats Inc. (NASDAQ:SEAT) is a leading online secondary ticket marketplace that connects ticket sellers with buyers. Only registered sellers can partner with this marketplace.
Its loyalty program and engagement initiatives have led to a lot of repeat orders over time. However, the average order size decreased from $363 in Q2 last year to $322 this year, partially offsetting the increase in total marketplace orders.
The company faced notable event cancellations, including tours by Aerosmith and Jennifer Lopez. Aerosmith officially announced the cancellation of their “Peace Out” farewell tour on August 2, due to frontman Steven Tyler’s vocal cord injury.
Despite these challenges, it saw a significant increase in total marketplace orders (3.1 million orders), up 18% year-over-year in the second quarter of 2024. There was also a 19.92% year-over-year improvement in revenue, recording a total revenue of $198.32 million. The loss per share in this period was $0.01.
One of its projects, Skybox Drive, an automated pricing tool designed to enhance seller engagement and optimize ticket pricing, is in the final stage of its beta phase, with a formal launch expected soon. It’s still expecting slower growth in sales and revenue for the rest of the year. 2023 had many popular artists touring in large venues, a level of success difficult to repeat in 2024.
24 hedge funds are long in the company. The largest one is Anson Investments, with a value of $13,879,367. Vivid Seats Inc. (NASDAQ:SEAT) also repurchased $16 million worth of shares. Management says they’re aiming to benefit from the growth in women’s sports and soccer, which are gaining popularity.
Overall SEAT ranks 3rd on our list of the best fast-growing penny stocks to buy. While we acknowledge the potential of SEAT as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SEAT 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.
