We recently compiled a list of 7 Best Russell 2000 Stocks to Buy According to Analysts. In this article, we will look at where GigaCloud Technology Inc. (NASDAQ:GCT) ranks among the best Russell 2000 Stocks to Buy According to Analysts.
The investor sentiment remains bullish toward the market, especially since the Fed’s recent decision to cut interest rates by half a percentage point, which is seen as a move to sustain economic health rather than a response to economic distress.
Moreover, the recent inflation report also showed positivity. After the first rate cut since March 2020, the August inflation report showed that the Personal Consumption Expenditures (PCE) price index rose 2.2%, the lowest level since early 2021. Core PCE, which excludes food and energy, also rose 0.1% for the month and recorded a 12-month increase of 2.7%.
While the market is reacting positively to the news, some experts are slightly worried about the market trends.
Bernstein’s Insights on Market Trends
Richard Bernstein, CEO of Richard Bernstein Advisors, joined CNBC ‘The Exchange’ on September 23 to discuss what’s happening in the market. He mentioned that stocks of small companies are not doing as well as riskier investments like cryptocurrencies. He is worried that the Federal Reserve is putting too much money into the economy, and it is not being spent wisely.
However, Bernstein believes that small and mid-sized companies will grow a lot by the end of the year, especially compared to the slower growth of big tech companies, such as the “Magnificent Seven.” Bernstein is also concerned that the Fed is lowering interest rates even though the profits are getting better, which might make the situation worse.
When asked if it’s time to focus on big tech stocks, Bernstein said many investors are doing that because of the current market trends. He thinks smaller companies offer better value and growth in the long run. He criticized risky investments like cryptocurrencies, saying they take money away from important areas like infrastructure, which could harm the economy. He warned that financial bubbles, where prices go too high too fast, can be just as harmful as regular inflation.
The bullish sentiment around small-cap stocks is also shared by Greg Tuorto, a portfolio manager at Goldman Sachs Asset Management, as we discussed his interview with Yahoo Finance in our article, 7 Cheap Small-Cap Stocks To Buy Now. Here is an excerpt from it:
“He [Greg Tuorto] highlighted several supportive factors for small caps, including a stable U.S. economy and opportunities in sectors like technology, healthcare, and consumer industries. Despite recent underperformance, he believes small caps are positioned for a rebound, driven by strong earnings growth rather than multiple expansions.
Tuorto also emphasized the potential for small caps to outperform large caps in 2025, given that their earnings outlook appears more favorable.”
Our Methodology
For this article, we made a list of the 35 biggest best weekly performers of the small-cap index in the week ending September 27. Next, we narrowed our list of 7 stocks with the highest average analyst price target upside. The stocks are listed in ascending order of their price target upside. We also added the hedge fund sentiment around each stock, which was taken from Insider Monkey’s database of over 900 elite 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).
GigaCloud Technology Inc. (NASDAQ:GCT)
Average Price Target Upside: 135.14%
Number of Hedge Fund Holders: 5
GigaCloud Technology Inc. (NASDAQ:GCT) is a company that provides comprehensive B2B eCommerce solutions specifically tailored for large parcel merchandise. The company’s GigaCloud Marketplace seamlessly integrates product discovery, payment processing, and logistics into a single platform, which makes it easy for manufacturers, primarily from Asia, to connect with resellers across the United States, Europe, and Asia.
The platform facilitates cross-border transactions in various categories, including furniture, home appliances, and fitness equipment. It has a strong operational infrastructure and manages 21 warehouses globally, with over four million square feet of storage space, 14 of which are situated in the United States.
The company effectively covers 11 ports of destination and 15 ports of loading, handling approximately ten thousand containers annually through partnerships with leading freight service providers. The extensive logistical network supports the efficient movement of goods, which improves its competitive edge in the eCommerce landscape.
Since its launch in January 2019, GigaCloud Technology (NASDAQ:GCT) has focused initially on the global furniture market and has successfully expanded into other sectors like home appliances and pet products.
The growth trajectory is reflected in the company’s impressive gross merchandise volume (GMV), which reached $438.1 million for the twelve months ending March 31, 2022, up from $190.5 million in 2020.
It forecasts total revenues between $266 million and $282 million for the third quarter of 2024, a sign of a strong business outlook. During the Q2 earnings call, management expressed enthusiasm over the pilot phase of its industry-first Branding-as-a-Service (BaaS), which has garnered interest from both current and prospective marketplace sellers. It seeks to help sellers advance product visibility, which could potentially drive further growth in marketplace transactions.
In September, the company announced a share repurchase program that allows for the repurchase of up to $46 million of Class A ordinary shares over the next year. The decision shows the company’s focus on delivering shareholder value, especially given the impressive $133.5 million generated from operating activities in fiscal year 2023.
With $200 million in cash, cash equivalents, and liquid investments, alongside no external debt, it is well-positioned to execute this repurchase program while continuing to focus on strategic acquisitions.
It takes its place among our best Russell 2000 stocks to buy according to analysts. GigaCloud Technology (NASDAQ:GCT) has a Buy rating from 5 analysts and the average price target of $55.87 implies an upside of 135.14% from the stock’s price, as of September 27.
Overall GCT ranks 5th on our list of best Russell 2000 stocks to buy according to analysts. While we acknowledge the potential of GCT 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 GCT 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 on Insider Monkey.