We recently published an article titled, Jim Cramer’s Latest Lightning Rounds: 15 Stocks to Watch. In this article, we are going to take a look at where First Watch Restaurant Group, Inc. (NASDAQ:FWRG) stands against other stocks discussed by Jim Cramer during the latest lightning rounds.
Recently on Mad Money, host Jim Cramer stressed the necessity of staying updated on economic indicators, government actions, and industry developments to make informed investment choices. He emphasized that speculation should be approached with the mindset of a “pro” rather than a novice. Cramer mentioned that while he does not oppose speculation, it must be done with an understanding of the risks involved. He remarked:
“Otherwise, if things go south, you’ll be caught playing a game of endless musical chairs, led by me getting a huge number of lightning round calls about some very sketchy outfits that all belong to what I call the hot money segment.”
Cramer provided insight into this hot money segment, describing it as a segment with limited capital that cannot satisfy all the demand. He specifically pointed to China, explaining that the current policies from the Chinese government have created an environment where, for the moment, it seems nearly impossible to incur losses. He elaborated that the government is actively subsidizing stock purchases and promoting buybacks and insider buying through liquidity support.
It has led to significant price movements in the market. When considering investments in Chinese stocks, Cramer advised caution, suggesting that investors should focus on companies capable of withstanding market fluctuations. He pointed out that many people are tempted to buy Chinese auto stocks, especially given their impressive advancements in electric vehicle technology. Nonetheless, he warned that the electric vehicle market is becoming increasingly saturated.
Cramer added that with the limited amount of hot money available, speculative stocks now face competition from cryptocurrencies. He expressed his belief that Bitcoin and Ethereum are the only cryptocurrencies with a good chance of recovery, dismissing most others as “junk”.
He shared that he only invests in these two digital currencies and avoids common stocks tied to the cryptocurrency market, deeming them too risky compared to Bitcoin and Ethereum, which benefit from exchange-traded products backing them. Cramer concluded by mentioning that speculation should be done wisely, saying, “With any speculative trade, there’s a beginning and an endpoint.”
Our Methodology
For this article, we compiled a list of 15 stocks that were mentioned by Jim Cramer during the lightning rounds of his episodes of Mad Money on October 4 and October 7. 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).
Cramer Says First Watch Restaurant Group, Inc.’s (NASDAQ:FWRG) ‘Multiple Is Way Too High’
First Watch Restaurant Group, Inc. (NASDAQ:FWRG)
Number of Hedge Fund Holders: 8
First Watch Restaurant Group, Inc. (NASDAQ:FWRG) is an operator and franchisor of a chain of restaurants across the United States under the First Watch brand. It has more than 535 locations spanning 29 states. The company has established a significant presence in the breakfast and brunch market. Cramer thinks the stock is overvalued. As of October 8, the stock is trading at an over 126% premium compared to its sector median. When Cramer was asked about the company, he said:
“You know, right now this restaurant group is very weird… I gotta tell you, I’m worried about First Watch being a competitive outfit because the multiple is way too high. So I’m gonna say no to that one.”
On October 5, Guggenheim lowered the price target on First Watch Restaurant (NASDAQ:FWRG) to $20 from $24 and maintained a Buy rating. The firm kept its earnings before interest, taxes, depreciation, and amortization (EBITDA) forecast for 2024 at $108 million. However, it adjusted its 2025 EBITDA estimate down to $120 million from a previous projection of $125 million.
For its updated outlook for fiscal year 2024, First Watch Restaurant (NASDAQ:FWRG) sees same-restaurant sales growth to fall within a range of -2.0% to flat, with projected traffic growth showing a decline in the negative mid-single digits. Despite these challenges, the company has reaffirmed guidance for total revenue growth between 17.0% and 19.0%, alongside an adjusted EBITDA forecast of between $106 million and $112 million.
Overall, FWRG ranks 15th on our list of stocks discussed by Jim Cramer during the latest lightning rounds. While we acknowledge the potential of FWRG 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 FWRG 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.