We recently compiled a list of the 10 Best Stocks Under $100 To Invest In. In this article, we are going to take a look at where PayPal Holdings, Inc. (NASDAQ:PYPL) stands against the other best stocks under $100.
Wall Street experts believe that mid-cap stocks might be well-placed for a strong run-up. As per Ryan Detrick (Chief Market Strategist at Carson Group), historically, midcaps outperform once the US Fed actually initiates cutting rates. According to him, the small and mid-caps are expected to surge up to 20% over the upcoming 12 months, far exceeding the large-cap counterparts.
Furthermore, Goldman Sachs believes that mid-caps outperform large- and small-cap stocks over the 12 months after the first rate cut. As market experts continue to expect a soft landing, the investors might look for other options apart from the biggest companies.
What Happened in Q3 2024 and What to Expect in Q4 2024?
As per the earnings sight report from FactSet dated 1st November, the S&P 500 continues to report mixed results. The Q3 remained strong for risk assets and safe havens, with the US markets delivering an all-time closing high to finish Q3 and bonds posting positive returns, as per JPMorgan Asset Management. Overall, the S&P 500 gaining for 4th straight quarter (making 18 new highs), and the US Treasuries and corporate bonds rallying with the decline in yields dominated much of the movements in Q3 2024. The asset management firm also added that gold saw its biggest gain since Q1 2016 (thanks to the expectations of faster rate cuts) and China’s stimulus supported equity market returns.
What is expected for Q4 2024 now? JPM believes that positive expected earnings growth, cooling inflation, easing policies of central banks, and firm job creation should help create a strong backdrop for risk assets. Wall Street analysts believe that mid-caps might be in a position to see strong growth moving forward.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Outlook for Mid-caps
As per BofA’s Jill Carey Hall, mid-caps can be considered as the “best hedge” for the near term.
According to Hall, the mid-caps have experienced better recent guidance and revision trends and have also surpassed the small caps on average in the downturn scenarios. Mid-caps can also act as a hedge against fewer-than-expected rate cuts, considering that small caps are rate-sensitive.
According to Goldman’s Jenny Ma, the start of the rate-cut cycle remains a potential source of incremental equity demand and a boost to broader investor risk sentiment. Moreover, over the short term, mid-cap performance as compared to other segments is expected to be dependent on the strength of economic growth data, along with the pace of the easing cycle.
As per Wells Fargo, mid-cap growth stocks are technically oversold as of now. Despite this, these stocks have a significant scope to outperform. It also added that stability in their earnings, risk, liquidity, and balance sheet appear to be more attractive as compared to small caps.
With these trends in mind, let’s take a look at the 10 Best Stocks Under $100 To Invest In.
Our Methodology
To list the 10 Best Stocks Under $100 To Invest In, we first used a screener to extract stocks trading under $100. Next, we narrowed our list by selecting the ones having high hedge fund holdings. Finally, the stocks were arranged in the ascending order of their hedge fund sentiments, 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).
An executive of the company viewing a portfolio of investment grade municipal obligations.
PayPal Holdings, Inc. (NASDAQ:PYPL)
Stock Price as of November 6: $81.41
Number of Hedge Fund Holders: 87
PayPal Holdings, Inc. (NASDAQ:PYPL) operates a technology platform that enables digital payments on behalf of merchants and consumers.
Wall Street analysts believe that PayPal Holdings, Inc. (NASDAQ:PYPL)’s competitive advantage revolves around its network effect, which has been established over several years. The company’s management continues to pursue numerous strategic initiatives in a bid to drive growth and improve profitability. It is focusing on enhancing mobile checkout experiences, which demonstrated healthy conversion uplifts in early testing phases. Braintree, a key component of PayPal Holdings, Inc. (NASDAQ:PYPL)’s offerings, should continue to contribute positively to transaction margin dollar growth.
The company’s focus on strategic initiatives like Fastlane, PayPal Everywhere, and enhanced mobile checkout experiences place it well for healthy future growth. Fastlane aims at a significant portion of the e-commerce market which is not served by button-based solutions. This provides a substantial growth opportunity. Furthermore, PayPal Holdings, Inc. (NASDAQ:PYPL)’s efforts to improve product velocity might result in better transaction gross profit performance.
Also, Venmo’s strong user base and increasing adoption of monetization features like Venmo debit card and Pay with Venmo service should fuel PayPal Holdings, Inc. (NASDAQ:PYPL)’s revenue and profitability.
Mizuho upped its target price on shares of PayPal Holdings, Inc. (NASDAQ:PYPL) from $90.00 to $100.00, giving an “Outperform” rating on 14th October. Longleaf Partners, managed by Southeastern Asset Management, released its Q3 2024 investor letter. Here is what the fund said:
“PayPal Holdings, Inc. (NASDAQ:PYPL) – Digital payments platform PayPal was a contributor for the quarter. The company posted solid results, with gross margin dollars growing by 8%, an improvement over the 4% increase in the previous quarter. Strong cost management also led to double-digit FCF growth, a key metric for us. The company further enhanced shareholder value by repurchasing nearly 10% of its shares on an annualized basis, leading to even stronger FCF per share growth. Much of what we envisioned at our initial investment is materializing quicker than expected, driven by the improved leadership of relatively new CEO Alex Chriss.”
Overall, PYPL ranks 4th on our list of the best stocks under $100 to invest in. While we acknowledge the potential of PYPL as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than PYPL 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.