We recently published a list of 10 Best Packaging Stocks to Buy According to Analysts. In this article, we are going to take a look at where Smurfit Westrock Plc (NYSE:SW) stands against other best packaging stocks to buy according to analysts.

An Overview of the Global Packaging Market

According to a report by Mordor Intelligence, the packaging market size is estimated at $1.14 trillion in 2024 and is expected to grow to $1.38 trillion by 2029, growing at a compound annual growth rate of 3.89% during the forecast period (2024-2029).

Region-wise, Asia Pacific is the fastest-growing region in the packaging market, with plastic packaging being widely utilized in the region. India and China’s food and beverage markets are contributing to this utilization. Japan is another major consumer of paper-based products in diverse sectors.

Market trends reflect that paper and paperboard packaging products are to witness the highest growth. There has been an increasing demand for eco-friendly packaging with minimal environmental footprint. In this regard, paper-based solutions such as bags, pouches, and cartons, have driven a surge in sustainable packaging adoption. The demand for eco-friendly paper packaging solutions is also coming from the environmental regulations on non-biodegradable and non-recyclable packaging solutions as well as the rising trend of online retail.

The perception of customers regarding paper and paperboard packaging being more environmentally friendly than plastic packaging is also shaping this demand. Gen Z is especially more inclined towards the rising sustainability trend. Oisin Hanrahan, the CEO and co-founder of Keychain, described the prevalent Gen Z consumer preferences by stating:

“Gen Z has a unique preference for conscious consumption when compared to any generation, which provides a huge opportunity for brands to win them over with sustainable ingredients, packaging, and practices”

Is Generative AI the Future of the Packaging Industry?

As reported by McKinsey & Company, the packaging industry has historically been behind other sectors in terms of adopting new technologies such as traditional AI and machine learning. However, a recent survey of over 200 paper and packaging executives across substrates and geographies revealed that executives recognize the potential of generative AI to drive business value. While approximately 95% of the respondents believed their companies should invest in gen AI, 77% said that their companies have moderate to strong intentions to use the technology in the near future.

In regards to the current adoption of gen AI, 24% of respondents reported that they either have launched or are developing generative AI tools or solutions in their area of work. A majority of those who had implemented gen AI saw its generated impacts as meeting or exceeding expectations. Survey respondents also expect generative AI to enable revenue growth and cost savings. They believed that opportunities to use generative AI are present across the packaging and paper value chain. The technology can also help generate new ideas through intellectual property and patent analytics, give customer analysis, and create customization options. Gen AI is expected to have the most profound impact on the commercial side of the industry for instance increasing sales team productivity, optimizing marketing spend, and improving pricing capabilities for companies.

While generative AI has an obvious advantage over traditional Artificial Intelligence since it can deal with messier data and offers easier adoption because of its accessible user interface, players in the paper and packaging industry are still subject to challenges. These challenges include limited access to data and to a modern data tech stack, gen AI’s use causing intellectual property or privacy concerns, limited understanding of use cases to drive value in commercial activities, associated costs, and resistance to change among others.

Our Methodology

In order to compile a list of the 10 best packaging stocks to buy according to analysts, we first used a stock screener to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest average upside potential. The 10 best packaging stocks to buy according to analysts have been arranged in ascending order of their average upside potential, as of November 1.

At Insider Monkey we are obsessed with 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).

Smurfit Westrock Plc (NYSE:SW)

Average Upside Potential: 8.38%

Number of Hedge Fund Holders: NA

Smurfit Westrock Plc (NYSE:SW) serves as a global leader in sustainable paper and packaging. The firm operates in 40 countries with more than 500 packaging converting operations and 62 paper mills. Its portfolio of innovative packaging solutions is broad and ranges from corrugated and consumer packaging to Bag-in-Box packaging and point-of-sale displays.

Smurfit has an unparalleled scale and global reach. The firm positions itself uniquely to cater to evolving customer needs through the breadth of its paper-based packaging offerings as well as its suite of value-added services. It also has a deep understanding of the unique challenges each sector faces by working with more than 100,000 customers across 40 countries in every industry. Smurfit has been undergoing strategic asset optimization. Over the past 22 months, the firm has closed 10 corrugated packaging facilities, 13 consumer packaging facilities, and two mills, while it divested four mills in North America. Simultaneously, it has closed one mill and six packaging facilities in Europe, MEA &APAC.

For the third quarter ended September 30, Smurfit Westrock Plc (NYSE:SW) recorded net sales of approximately $7.7 billion. Net sales increased year-over-year, driven by the positive impact from acquisitions of $4,693 million, of which $4,684 million was related to the acquisition of WestRock and a net positive volume impact of $98 million mainly driven by a rise in corrugated volumes. The net loss for the quarter was $150 million which was primarily because of transaction-related expenses and purchase accounting adjustments totaling approximately $500 million.

The firm is continuing its focus on asset optimization and has set itself to become the go-to sustainable packaging partner of choice with an unrivaled scale, geographic reach, and product portfolio.

Overall, SW ranks 10th on our list of best packaging stocks to buy according to analysts. While we acknowledge the potential of SW 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 SW 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.