We recently published a list of 10 Best All-Time Low Stocks To Buy Right Now. In this article, we are going to take a look at where The Western Union Company (NYSE:WU) stands against other best all-time low stocks to buy right now.
With November coming to a close, while markets are focused on the future of artificial intelligence and the degree of profitability that AI firms can extract from their multi-billion dollar investments, other factors are also driving investors’ decision-making. The non-AI factors dominating markets include inflation, economic growth, and the Federal Reserve’s interest rate reduction cycle.
In fact, even though AI has driven the narrative for markets in 2023 and 2024, before it, macroeconomic concerns were the primary factors behind investor decision-making. The US economy grappled with historic inflation following the lax monetary policy during the coronavirus pandemic. To tamp down inflation, the Federal Reserve hiked rates to two-decade-high levels.
Now, the macro narrative on Wall Street is driven by how fast the Fed will reduce interest rates. Higher rates and a tight economy have broad implications for stocks. They drive cyclical sectors to low levels and prop up others such as financials and defensives. Additionally, tighter discretionary spending means that high-growth sectors like electric vehicles suffer. High interest rates also constrain sectors such as real estate, while a sluggish economy leads to others such as industrial also lagging major stock indexes.
However, when discussing all-time low stocks, one has to keep in mind that their share price often drops not only because of broader sector and market-level trends but also because of microeconomic and firm-specific factors. To understand how microeconomic factors are nearly indispensable factors in driving these trends, consider the shares of one of the most well-known dating applications in the US and worldwide. This stock ranked fourth on our list of the best oversold tech stocks to buy as of late October. Its shares are down 40% year-to-date after having slightly recovered from the 54.14% drop at the time of our coverage.
Its stock tanked to an all-time low price of $5.71 the day after the firm released its second-quarter earnings report. Dating applications are a classic example of firms dependent on discretionary spending. For this firm, its earnings report saw Q2 revenue of $268.6 million miss analyst estimates of $273 million. While earnings-per-share of $0.22 did beat analyst estimates of $0.15, they merely reflected cost cutting. The broader slowdown in the dating application market, as evidenced by rival firm Tinder’s shares dropping by 17.8% in November after its third-quarter earnings is evidence of macroeconomic factors that push stocks toward all-time lows.
However, for the stock under discussion, micro and firm-specific factors also played a role in the stock touching the all-time low level. The accompanying fiscal year revenue growth guidance in the second-quarter earnings is what was responsible for the historic 29% post-earnings share price drop. The firm guided full-year revenue growth to range between 1% and 2%, which was far lower than analyst estimates of 8.4% and the previous guidance of 8% to 11%. Consequently, investors reacted and priced out the over-stretched growth estimates from the share price.
These growth estimates were based on firm-specific factors, which as we’ve pointed out above, are key to push any stock to new lows. This strategy has seen it revamp its dating application and seek to bolster revenue by focusing on the Premium Plus segment. However, the ill-fated earnings report saw it announce the decision to “slow down certain monetization efforts like Premium Plus.” As per management, the decision stemmed from a need to re-balance “subscription tiers and merchandising in favor of mechanisms that reward positive peer behaviors and support better ecosystem health.” Naturally, a flip in much-touted growth initiatives at a time when revenue missed guidance and the industry had slowed down did not impress investors and they punished the stock in response.
Another stock that touched all-time lows in 2024 is the well-known firm that owns CNN and other media assets. Formed after WarnerMedia’s spin-off and subsequent merger with Discovery, the shares touched $6.71 in August for their lowest reading following the merger in 2022. As was the case with the dating application’s stock, macro and micro factors had a role to play. The firm’s second-quarter earnings saw it report a whopping $10 billion loss and miss analyst revenue estimates of $10.07 by posting $9.71 in revenue.
However, while the earnings report wasn’t stellar, the true reason behind the drop was the television network division. The firm’s earnings report saw it write down its media asset value by an unbelievable $9.1 billion which indicated to investors that it had overpaid for them at the time of its merger. Naturally, Wall Street wasn’t impressed and the stock tumbled to a 15-year low if we analyze pre-merger share price performance as well.
Our Methodology
To make our list of the best all-time low stocks to buy, we made a list of 40 stocks with a market capitalization greater than $300 million that were trading at ranges 0% to 10% above their all-time low price. These stocks were ranked by the number of hedge fund investors that had bought the shares during Q3 2024, and those with the highest number of investors were chosen.
Why are we interested in 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).
A close-up of hands counting bills, depicting the payment services the company offers.
The Western Union Company (NYSE:WU)
Number of Hedge Fund Holders In Q3 2024: 27
The Western Union Company (NYSE:WU) is one of the oldest and biggest money transfer firms in the world. As of H1 2024, all of the firm’s revenue came from either money transfer or consumer services. Within these two businesses, money transfer accounted for the bulk of sales, as it generated 90% of The Western Union Company (NYSE:WU)’s revenue. The reliance on money transfer services means that the firm is dependent on economic health to a large extent for its well-being. Additionally, growing global scrutiny of money transfers also means that The Western Union Company (NYSE:WU) has to navigate a tightrope when it comes to regulations. While the US economy has maintained its strong growth trajectory, the fact that 62% of The Western Union Company (NYSE:WU)’s revenue is ex-North America means that the firm has to wait for the global economy to regain strength before it can generate tailwinds.
The Western Union Company (NYSE:WU)’s management commented on global trends during the Q3 2024 earnings call. Here is what they said:
“In the last several months, there have been a number of political events that have disrupted the typical migration flows in the region with recent elections in Panama, the Dominican Republic, Venezuela and Mexico. In some instances, residents may have delayed their migration to vote or stayed to see the outcome of an election in their home country. And in other instances, newly elected officials have attempted to stem migration. For example, in Panama, the new President has attempted to close the migration route from Colombia into Panama through the Darien Gap significantly reducing the number of migrants entering Panama. We believe these macro events have created a short-term impact on our Latin American business, which is roughly 10% of Consumer Money Transfer revenue.
However, as you can see from our broader results, we benefit from our globally diversified business and the portfolio effect it affords us. While Latin America slowed in the quarter, regions like Europe, the Middle East, ex-Iraq and APAC, which together account for 50% of CMT revenue all improved, with revenue growth rates in all three regions improving by 500 to 1,000 basis points relative to the second quarter. Operating in 200 countries and territories means there are frequently both positives and negatives within our portfolio. We believe the benefit of being a truly global at-scale player will enable us to manage these kinds of disruptions better than many of our smaller competitors. Now shifting to our digital business. As we discussed at our 2022 Investor Day, returning our digital business to double-digit revenue growth is a key priority for our organization and is essential to driving top line revenue growth for the overall company.”
Overall, WU ranks 6th on our list of best all-time low stocks to buy right now. While we acknowledge the potential of WU 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 time frame. If you are looking for an AI stock that is more promising than WU 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.