We recently compiled a list of 10 Best Stocks Under $15 To Buy Now. In this article, we will look at where Snap Inc. (NYSE:SNAP) ranks among the best stocks under $15.
While September is usually the toughest month for the stock market, it is delivering solid results this time. Stocks are soaring after the Federal Reserve announced a half-point cut this month to bring interest rates between 4.75% and 5%. This has led to the market racking up records again as investors look to move from riskier investments to stocks, reported CNN.
The broader market marked its 42nd record-high close in 2024 this past Thursday. The index, which has a history of September dips, is on track for a 1.3% gain this month, which will take its quarterly advance close to 5%. The Dow Jones Industrial Average surged 0.4% a day later to reach its 32nd record high for the year after investors received encouraging economic data regarding inflation, which has raised hopes for further interest rate cuts.
According to the Personal Consumption Expenditures Price Index, inflation rose 2.2% in August this year, which marked the lowest inflation rate in the United States since February 2021. Overall inflation in the country is crawling back to the Federal Reserve’s goal of a two percent annual rate. The easing of consumer prices is expected to result in further interest rate cuts to prevent a spike in unemployment rates, say economic experts. This has raised hopes among investors about the American economy returning to solid footing.
However, Fundstrat Global Advisors’ co-founder, Tom Lee, in an interview with CNBC this week cautioned against diving into stocks after interest rate cuts, citing election uncertainty.
This Fed cut cycle I think is setting the stage for markets to be really strong over the next one month or next three months. But, what the stocks do between now and let’s say election day, I think is still a lot of uncertainty. And that’s the reason why I’m a little hesitant for investors to dive in.
In the weeks leading to the cuts, Lee, who is generally bullish on the stock market, warned investors that stocks could fall 10% during the coming eight weeks amid nervousness around the presidential elections, and added that the dip should viewed as a buying opportunity.
Liz Young Thomas, the head of investment strategy at SoFi, has also acknowledged the risk of stock market volatility associated with the presidential elections. While talking to the Business Insider, she noted how thinner trading volumes between June and August, when traders are on summer vacations, drive strong market performance, and the market turns volatile when stock activity picks up after traders return to their desks in September. According to Young Thomas, a two percent shift in share prices has become the norm in September. However, during the election year, volatility peaks around mid-October instead of September, and the market returns to normalcy after the results are announced.
Methodology
We scanned Insider Monkey’s database of 912 hedge funds for the second quarter of 2024 to look for stocks with a share price of under $15 and then picked the top 10 companies with the highest number of hedge funds having stakes in them. We ranked them in ascending order of hedge fund holders in each company. In the case where two or more stocks had the same number of hedge fund holders, we used market capitalization as a tie-breaker and placed the stock having a greater market capitalization at a higher ranking.
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).
Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders: 44
Share Price as of the close of September 27: $10.87
Snap Inc. (NYSE:SNAP) is an American photo-sharing and instant messaging service founded by Evan Spiegel in 2011. The company initially operated as Snapchat Inc. after its launch before being rebranded in 2016 to include Bitmoji and Spectacles in its portfolio of products and services. With over four billion snaps sent each day, it is one of the most popular social media platforms in the world.
During Q2 2024, the company generated a revenue of $1.24 billion, representing a 16% year-over-year increase. Advertising revenue accounted for 91% of the share. Net loss declined to $249 million from $377 million a year ago during the same period. This was driven by a significant improvement in adjusted EBITDA and a reduction in stock-based compensation and related expenses. Diluted net loss per share was recorded at $0.15, while non-GAAP EPS was at $0.02 in line with analysts’ expectations for the quarter.
Snap Inc. (NYSE:SNAP) also reached 432 million daily active users and over 850 million active monthly users during the quarter, setting it on the path to reach its target of having 1 billion active monthly users. Non-advertising revenue totaled $105 million, with most of the share coming from Snapchat Plus subscriptions, which crossed the 11 million subscriber milestone in Q2.
For Q3, the company anticipates revenue between $1.34 billion and $1.38 billion – implying a 12-16% increase from last year – and EBITDA in the range of $70 million to $100 million. It also expects daily active users to reach the 441 million mark during the quarter. While the brand advertising environment remains weak in certain verticals and no significant improvement is expected in the short term, the overall outlook for the company appears positive.
With steady growth shown over the last few quarters, Wall Street analysts expect a 34% upside in the company’s share price. According to Insider Monkey’s database, 44 hedge funds have a stake in Snap Inc. (NYSE:SNAP) as of Q2 2024, making it one of the best stocks under $15 to buy now.
Overall SNAP ranks 10th on our list of the best stocks under $15. While we acknowledge the potential of SNAP 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 SNAP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published on Insider Monkey.