By Paul R. La Monica

Investors are picking up a trash stock.

And that isn't a bad thing. Waste Management, a leader in the garbage collection and recycling businesses, has been a hot stock as of late.

Shares of Waste Management rose nearly 10% in November while the broader market was relatively flat. Competitors Republic Services and Waste Connections also enjoyed solid Novembers, rising more than 4% and 5% respectively last month.

But Waste Management, the industry leader with estimated sales of $25.3 billion this year and a market valuation of nearly $88 billion, could have more room to run.

One reason? With investors starting to question the valuations for Nvidia and other artificial-intelligence stocks, companies in industries with less uncertainty (and less glamour) could thrive. Those whose businesses won't be disrupted by AI are in a particularly sweet spot.

J.P. Morgan analyst Tami Zakaria wrote in a report Monday that "as appetite for non-AI related stocks grows amid the latest AI sell-off," Waste Management now looks like "one of our top defensive growth long ideas for 2026." She raised her target for the stock price to $265, more than 20% above its current level, from $255.

It is worth noting that despite Waste Management's recent rally to a bit more than $218 on Monday afternoon, it is still a laggard this year. The stock had gained 8.1% so far in 2025 compared with a 16% increase for the S&P 500.

Zakaria thinks that skepticism among investors about Waste Management's $7.2 billion acquisition of the medical-waste collection company Stericycle in 2024 is to blame. But she argues that this will dissipate as the company proves that the deal will be able to boost both revenue and earnings before interest, taxes, depreciation, and amortization, or Ebitda, by 2027 and beyond.

Other analysts are also bullish on Waste Management's prospects for next year. TD Cowen's James Schumm, who has a $265 price target on the stock, wrote in a report after the company's third-quarter earnings in late October that despite some short-term issues folding Stericycle into its operations, "solid waste continues to be...well, solid."

Schumm noted that "the company's encouraging outlook diverges from peers who see incremental weakness in construction and industrial volumes." He said Waste Management has "accelerating momentum" in profitability for its recycling business and in renewable natural gas, produced from organic waste.

Oppenheimer's Noah Kaye, who has a $262 price target on Waste Management, wrote in a report in late October that the company's free cash flow outlook for 2026 was better than Wall Street's expectations thanks in part to stronger pricing power and improved worker turnover and safety benefits. The new guidance, Kaye thinks, should support "continued outsized margin expansion."

There is one notable concern for investors, however. Waste Management's reputation for predictable revenue and earnings growth comes at a price. The stock is now trading at about 26 times the per-share earnings expected for 2026.

UBS analyst Jon Windham, who rates the stock at Neutral, argues that concerns about customer retention in the healthcare waste business are a reason why the stock deserves a lower valuation. He cut his target for the price to $225 from $240 in late October.

Still, more than two-thirds of the 30 analysts who cover the stock have Buy ratings on Waste Management. What is more, the company's valuation isn't as high as it has been. The stock now trades at an 18% premium to the S&P 500's multiple of 2026 earnings, lower than Waste Management's typical 33% premium to the market.

Waste Management also trades at a discount to its two main peers. Republic Services and Waste Connections are valued at 30 and 31 times 2026 profit forecasts respectively.

So you don't have to be Oscar the Grouch from Sesame Street to love the stock. Waste Management is in the bargain bin compared with its competitors.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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December 01, 2025 14:50 ET (19:50 GMT)

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