Jim Cramer’s 10 Comeback Stocks

Published on December 22, 2022 at 2:27 pm by Hamna Asim in Hedge Funds, News

In this article, we discuss Jim Cramer’s 10 comeback stocks. If you want to see more stocks in this selection, check out Jim Cramer’s 5 Comeback Stocks.

CNBC’s Jim Cramer mentioned beaten down tech stocks on November 22, which he believes can make a drastic comeback after the Federal Reserve stops its fiscal tightening. He also expects that there are many pure pandemic stocks that potentially cannot recover from this year’s lows. In 2022, the biggest and most prominent growth stocks on Wall Street, including the likes of Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Apple Inc. (NASDAQ:AAPL), “crashed and burned”, as Cramer puts it.

However, Jim Cramer noted that most of the high-quality tech names which were hammered due to the Fed’s unstoppable rate hikes this year are the ones which have led the digital transformation journey for the world and multiple industries are dependent on them. He told investors:

“Nearly all of these, save Apple, are variations on the same story — stocks that were cut in half when their businesses had no such comedowns. Their stocks just got way ahead of themselves before the Fed took away that easy money.”

While consistent inflation, rampant interest rate hikes, COVID-19 lockdowns in China, and Russia’s invasion of Ukraine led investors to dump risky tech stocks and pile into safer bets, Cramer explained his rationale for future stock picking:

“Once the Fed relents, I’d much rather be in Big Tech, or the top cloud plays, or the better-run chipmakers like AMD and Nvidia.”

Our Methodology

We explored the 10 tech stocks that Jim Cramer said can make a comeback on a November 22 segment of CNBC’s Mad Money. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022. The list is arranged according to the number of hedge fund holders in each firm.

Jim Cramer’s Comeback Stocks

10. Tesla, Inc. (NASDAQ:TSLA)

Number of Hedge Fund Holders: 88

Tesla, Inc. (NASDAQ:TSLA) develops, manufactures, leases, and sells electric vehicles, energy generation solutions, and storage systems in the United States, China, and internationally. On December 19, local news outlets disclosed that Tesla, Inc. (NASDAQ:TSLA) is set to announce a new Gigafactory in Mexico with an initial investment of up to $1 billion.

While Cramer backed Tesla, Inc. (NASDAQ:TSLA) at the end of November, investors are watching the stock closely as the selling pressure has amped up over the last few weeks. Although the stock traded a new multi-year low of $135.89 on December 15, some long-term Wall Street bulls are seeing value in the lowered price.

On December 22, Canaccord analyst George Gianarikas maintained a Buy recommendation on Tesla, Inc. (NASDAQ:TSLA) but lowered the firm’s price target on the shares to $275 from $304. The analyst noted the latest decline in the shares is the worst in Tesla, Inc. (NASDAQ:TSLA)’s history. He said while present fundamentals appear fairly uncertain, he sees potential green shoots in 2023 and sustained extraordinary growth beyond to help improve equity performance.

According to Insider Monkey’s third quarter database, 88 hedge funds were bullish on Tesla, Inc. (NASDAQ:TSLA), compared to 73 funds in the prior quarter. Cathie Wood’s ARK Investment Management is a prominent stakeholder of the company, with 4 million shares worth $1.08 billion.

Like Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Apple Inc. (NASDAQ:AAPL), Tesla, Inc. (NASDAQ:TSLA) is one of Jim Cramer’s favorite comeback stocks.

In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Tesla, Inc. (NASDAQ:TSLA) was one of them. Here is what the fund said:

“In 2014, before we began to invest in Tesla (NASDAQ:TSLA), I called Roger to ask whether he thought Elon Musk’s electric car business would succeed. I did not believe that Roger, an owner of dealerships that sell cars powered by internal combustion engines (ICE) would likely have a favorable opinion of Tesla’s prospects. That was principally for two reasons:

First, automobile manufacturing and distribution is unusually complicated, capital intensive, and highly regulated, which makes profitability problematic; second, cars with ICE motors require extensive annual maintenance, and dealer services revenues, not profits from automobile sales, are the most important contributor to profits of perpetual licensed ICE car dealerships.

Penske Automotive Group is principally an ICE car dealer. Since electric cars are powered by batteries and need little service, franchised dealerships are incented to sell ICE, not EV automobiles. Further, Roger had been a long-term director of General Motors. General Motors’ ICE automobile business would be disrupted if Tesla were successful. (click here to read more…)

9. Workday, Inc. (NASDAQ:WDAY)

Number of Hedge Fund Holders: 92

Workday, Inc. (NASDAQ:WDAY) is a California-based company that provides enterprise cloud applications in the United States and internationally. It is one of the tech names that Jim Cramer believes will make a comeback, as the underlying business fundamentals remain robust. On November 29, Workday, Inc. (NASDAQ:WDAY) announced that its board approved a new share repurchase program with authorization to purchase up to $500 million in common shares. The new share repurchase program is meant to lessen the impact of future share dilution from employee stock issuances.

On December 20, Jefferies analyst Brent Thill raised the price target on Workday, Inc. (NASDAQ:WDAY) to $235 from $225 and kept a Buy rating on the shares. The analyst noted that the appointment of Carl Eschenbach as co-CEO is a “very strong” addition to the leadership team and can also “open additional doors” for the company.

According to Insider Monkey’s database, Workday, Inc. (NASDAQ:WDAY) was part of 92 hedge fund portfolios at the end of Q3 2022, up from 71 in the earlier quarter. Stephen Mandel’s Lone Pine Capital is the biggest stakeholder of the company, with 5 million shares worth $764 million.

Here is what RiverPark Large Growth Fund has to say about Workday, Inc. (NYSE:WDAY) in its Q3 2022 investor letter:

“We also added a small position in Workday this quarter, taking advantage of its 2022 price decline. WDAY is a leading SaaS software solutions provider with two key subparts: Workday HCM offering end-to-end software for human resource departments, and Workday Financial Management for planning, spending, auditing, analytics, and reporting. The company sells to more than 9,500 medium-sized through enterprise customers across more than 175 countries, including more than 50% of the Fortune 500.

The company is benefitting from the secular shift to digitization for businesses and despite its 21% annual subscription revenue CAGR over the past 2 years (with 95%+ gross revenue retention), Workday still has less than 5% penetration of its $105 billion TAM. We believe the company can grow its top-line high-teens over the long-term, while continuing to improve margins (non-GAAP gross operating margin expanded 900 basis points to 22.4% over the past two years), leading to approximately 30% EPS growth for the foreseeable future. The company also requires limited capital expenditures, producing significant and growing FCF ($1.4b last year, up 37% year over year), which WDAY has used for acquisitions and debt repayment.”

8. Adobe Inc. (NASDAQ:ADBE)

Number of Hedge Fund Holders: 93

Adobe Inc. (NASDAQ:ADBE) is a California-based diversified software company that operates through three segments – Digital Media, Digital Experience, and Publishing and Advertising. Adobe Inc. (NASDAQ:ADBE) is one of the Jim Cramer comeback stocks to monitor. Adobe stock climbed 3% on December 16 as Wall Street became enthusiastic for the company’s business outlook and fiscal fourth-quarter results. Adobe Inc. (NASDAQ:ADBE) expects to announce earnings per share of $3.65 to $3.70 for the fiscal first quarter of 2023, with revenue in a range of $4.6 billion to $4.64 billion.

On December 16, Stifel analyst J. Parker Lane raised the price target on Adobe Inc. (NASDAQ:ADBE) to $400 from $375 and maintained a Buy rating on the shares after the company delivered “a clean finish to FY22, highlighted by a record net new Digital Media quarter.” After management reaffirmed the guidance it laid out for FY23 at its analyst day in October, the analyst believes investors will remain focused on the regulatory approval process for the Figma acquisition and the likely impact to the product pipeline once the deal has been concluded later in the year.

According to Insider Monkey’s Q3 data, 93 hedge funds were long Adobe Inc. (NASDAQ:ADBE), compared to 92 funds in the last quarter. Ken Fisher’s Fisher Asset Management is the leading stakeholder of the company, with 5.14 million shares worth $1.4 billion.

Jackson Square Partners made the following comment about Adobe Inc. (NASDAQ:ADBE) in its Q3 2022 investor letter:

“Two significant actions taken in the quarter were the exit of Adobe Inc. (NASDAQ:ADBE) and the initiation of Boeing. Adobe paid a price to acquire a competitor called Figma ($22B) that we could not justify even under the most bullish fundamental outlook. It struck us as desperate, defensive, and reactive. After reassuring investors for many quarters that Figma was not having a negative competitive impact on its business, to us this was a clear admission of the opposite. While a more optimistic interpretation could be that Figma is a good asset, Adobe just got rid of a competitor, and the day 1 stock reaction already wiped out more than $22B from Adobe’s market cap – we saw too many red flags potentially signaling worsening trends to come in Adobe’s core. It is also not obvious to us why Figma sails through anti-trust clearance, which if the deal is not allowed to proceed would leave a gaping exposure as Adobe just showed its hand.”

7. ServiceNow, Inc. (NYSE:NOW)

Number of Hedge Fund Holders: 103

ServiceNow, Inc. (NYSE:NOW) is a California-based company that offers enterprise cloud computing solutions that define, structure, consolidate, manage, and automates services for enterprises worldwide. The cloud-computing software company outperformed analyst estimates with its third quarter earnings. It is one of the top picks of Jim Cramer as a comeback tech stock.

Baird analyst Rob Oliver on December 21 maintained a Neutral rating on ServiceNow, Inc. (NYSE:NOW) and lowered the firm’s price target on the shares to $475 from $500. The analyst noted the company presented at several competitor conferences and said he now feels they are well positioned despite macro constraints. He reduced his 2023 estimates to factor in macro weakness, and introduced 2024 estimates slightly below consensus but said he is warming up to the stock.

According to Insider Monkey’s third quarter database, 103 hedge funds were long ServiceNow, Inc. (NYSE:NOW), compared to 99 funds in the prior quarter. Chase Coleman’s Tiger Global Management is the largest position holder in the company, with 1.7 million shares worth nearly $640 million.

Lakehouse Capital made the following comment about ServiceNow, Inc. (NYSE:NOW) in its Q3 2022 investor letter:

“Despite a challenging environment, US-based software company ServiceNow, Inc. (NYSE:NOW) performed well and reported revenues of $1.8 billion for the quarter, up 29% year-over-year in constant currency terms. The company’s operational metrics continue to be resilient, with remaining performance obligations growing 25% year-on-year in constant currency terms, total customers with over $1 million in annual contract value (ACV) growing 22%, and renewal rates holding firm at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal, which had its best quarter ever including a $20 million-plus net new ACV win. The company now boasts 1,530 customers generating in excess of $1 million in ACV, which is pleasing to see as it implies multiple solutions are involved and that the company’s platform model is increasingly resonating with customers. We continue to believe that ServiceNow is one the highest quality software businesses around as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”

6. Netflix, Inc. (NASDAQ:NFLX)

Number of Hedge Fund Holders: 115

Netflix, Inc. (NASDAQ:NFLX) is one of the comeback stocks on Jim Cramer’s list. On December 22, Netflix, Inc. (NASDAQ:NFLX) announced that it plans to buy Fort Monmouth’s Mega Parcel for $55 million to construct a state-of-art production facility. The company said it will invest upwards of $850 million to create one of the largest media production facilities in the world. Netflix, Inc. (NASDAQ:NFLX) stock has climbed 65.50% over the last 6 months as of December 22, yet it remains down about 50% year-to-date.

On December 19, Morgan Stanley analyst Benjamin Swinburne raised the price target on Netflix, Inc. (NASDAQ:NFLX) to $275 from $250 and kept an Equal Weight rating on the shares. The analyst said the launch and potential of the ad-tier and paid sharing have helped Netflix, Inc. (NASDAQ:NFLX) shares “nicely outperform since July” as consensus net adds expectations have lifted.

According to Insider Monkey’s third quarter database, 115 hedge funds were long Netflix, Inc. (NASDAQ:NFLX), compared to 95 funds in the prior quarter. The collective stakes in Q3 2022 increased to $6.6 billion from $4.7 billion in Q2 2022. Boykin Curry’s Eagle Capital Management is one of the leading position holders in the company, with 5.5 million shares worth $1.30 billion.

In addition to Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Apple Inc. (NASDAQ:AAPL), Netflix, Inc. (NASDAQ:NFLX) is one of the stocks backed by Jim Cramer to make a recovery.

Artisan Partners made the following comment about Netflix, Inc. (NASDAQ:NFLX) in its Q3 2022 investor letter:

“Netflix, Inc. (NASDAQ:NFLX) and Vertex Pharmaceuticals were two of our top contributors. Shares of Netflix got some relief after being under pressure in the first half of 2022. Media and entertainment stocks in general have been out of favor as investors grapple with the long-term economics of streaming services and slowing subscriber growth—what should be viewed as a normal feature of a maturing market. Our view is streaming is a scale and intellectual property business that will result in a few large winners, and we believe Netflix will be among this group. We initiated our position in Netflix in Q1 after shares fell by more than half due to concerns about subscriber growth and increasing competition from streaming upstarts. The stock then suffered a second down leg in April after the company reported subscriber losses for the first time in its history. Then in July, the company reported its second consecutive quarter of subscriber losses, but the nearly 1 million subscribers lost were much lower than the 2 million that management had forecast, and shares rallied on the news. For patient investors, there is reason for optimism that subscriber growth will turn around. The company has plans to crack down on password sharing and is launching a lower cost advertising supported tier. Our investment case is focused on an undemanding valuation, massive scale, a continued shift in time and attention from linear TV to streaming, and a financial condition which gives management the flexibility to operate unconstrained during a transition period for the business. We also believe Netflix can leverage its massive global scale of 200+ million subscribers into positive free cash flow through steady pricing increases and content spending controls.”

Click to continue reading and see Jim Cramer’s 5 Comeback Stocks.

AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

Published on May 1, 2024 at by Inan Dogan, PhD

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A New Dawn is Coming to U.S. Stocks

Published on May 2, 2024 at by Insider Monkey Staff

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Click to continue reading…

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