Jim Cramer on Globant: “It’s Only Going to Be More Difficult”

Globant S.A. (NYSE:GLOB) is one of the stocks on Jim Cramer’s radar recently. Cramer showed some pessimism around the company, as he remarked:

“There are very few things that current AI can do better than a well-trained human, but the one thing it’s terrific at is writing software code, which is real bad news for software development companies like Globant that make custom software for its enterprise clients. As their customer base got more comfortable with AI… Globant found it harder to grow, and as AI gets smarter and starts reasoning, I think it’s only going to be more difficult, really competitive for these guys…

Frankly, things are looking pretty darn grim this year, too. At the midpoint of Globant’s current revenue guidance, we’re talking about just 1% revenue growth this year, and that’s assuming they don’t miss and cut numbers again. Plus, their current earnings forecast represents a 4% decline from last year. In short, this has become a no-growth company. At this point, the best thing you can say about Globant is that the stock is cheap, trading at less than 10 times this year’s earnings forecast. But I never recommend solely because they’re cheap. Often, they’re cheap for a reason. If Globant cuts its forecast again, suddenly it’s going to look a lot more expensive on an earnings basis. And given their recent track record, I wouldn’t be surprised if that’s exactly what happens now…

… The weakness here has nothing to do with Argentina and everything to do with the fact that generative AI is eating these guys alive. So, no, I can’t bring myself to recommend this one, even though it seems cheap at less than 10 times earnings. Often, stocks that seem cheap turn out to be value traps. Here’s the bottom line: Maybe Globant can turn things around…. Maybe the AI effort takes hold, but I gotta tell you something, I’m not going to stick my neck out on this one. There are a lot easier ways to try to make some money. Sorry.”

A close-up of an experienced game engineer’s hands typing a complex code on a laptop.

Globant S.A. (NYSE:GLOB) provides technology services and platforms that integrate AI, software development, and digital transformation solutions.

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Disclosure: None. This article is originally published at Insider Monkey.