Author: The INO.com Team

Why Coinbase (COIN) Might Be Your Best Crypto Investment in 2024

Posted on by The INO.com Team

Over recent years, Exchange Traded Funds (ETFs) have grown increasingly popular, presenting a diverse range of assets that include commodities, stocks, and indices. Within this mix, Bitcoin Spot ETFs offer regulated avenues for corporations and institutions to invest in cryptocurrency.

Bitcoin Spot ETFs have a specific goal: To track Bitcoin's value through the possession of the actual digital currency. In essence, these ETFs function by acquiring Bitcoin and subsequently issuing shares based on the underlying cryptocurrency's value. Therefore, Spot ETFs are engineered to afford investors direct access to Bitcoin’s price fluctuations.

However, the approval for Spot ETF is pending. On January 10, the U.S. Securities and Exchange Commission (SEC) will decide regarding the approval of Bitcoin Spot ETF applications that several firms have submitted.

As the world continually evolves, Coinbase Global, Inc. (COIN) goes far beyond mere adaptation – it spearheads change. COIN, a prestigious cryptocurrency exchange, offers trading, custody and other services for various digital assets. It is implementing savvy strategies and revamping its leadership team to prepare for what could be an industry-altering phenomenon: the sanctioning of Spot Bitcoin ETFs.

This bold move is motivated by a dynamic combination of anticipation and strategic readiness. COIN isn’t merely passively awaiting regulatory approval; it is actively orchestrating the environment for it.

Let’s see how…

COIN’s Leadership Shuffle and Strategic Readiness

The cryptocurrency sector is anticipated to extend custodial services to traditional financial institutions that have lodged applications for spot Bitcoin ETFs.

Recently, Aaron Schnarch departed from his role as CEO of Coinbase Custody, a trust company regulated by the New York Department of Financial Services and audited by Deloitte & Touche.

Mr. Schnarch left the company in August and was superseded by Rick Schonberg, according to the company representative. Mr. Schonberg has been part of COIN since 2021.

COIN is the preferred custodian among Bitcoin ETF contenders such as BlackRock, Franklin Templeton, and Grayscale Investments, based on Bloomberg Intelligence data.

For potential Spot Bitcoin ETF managers, custody services are crucial to their operation, as investors depend on these services to maintain the tokens securely. This need has prompted leading financial institutions to enlist COIN for these services on approval of their funds.

This shift in leadership signifies more than a mere change in staff – it represents a purposeful strategic shift. Schonberg, a seasoned pro with experience from Goldman Sachs, brings not just his expertise but also a significant vision – one where COIN doesn't merely participate in the Spot Bitcoin ETF market but aims to dominate it.

COIN's preparations for the anticipated approval of spot Bitcoin ETFs are comprehensive. They are creating a robust infrastructure capable of managing an expected increase in trading volume, liquidity, and overall market demand. Much like a dam built in anticipation of a flood, COIN eagerly awaits what may prove to be substantial market growth.

Anticipated Regulatory Decisions and Potential Market Implications

Let’s talk about the elephant in the room now…

The subject of pending decisions by the U.S. SEC on Bitcoin spot ETF approval cannot be overstated. It feels like the eager anticipation of rain during a prolonged drought – an endless skyward gaze with little reprieve.

However, recent proceedings indicate that the U.S. judiciary is gently nudging the SEC toward a decision, igniting hope for impending regulatory clarity. COIN appears well-equipped for such a monumental shift, utterly prepared to harness the resulting opportunities in what could be a watershed moment for the digital assets industry.

Speculations surrounding the approval of Spot Bitcoin ETFs have already sent tremors through the financial markets. The volatile ebb and flow of Bitcoin prices mirror the suspense typically reserved for a blockbuster thriller.

Amid this volatility, COIN remains positioned to emerge as a triumphant player, ready to capitalize on favorable market outcomes. Noteworthy entities like BlackRock, Franklin Templeton, and Grayscale Investments are already aligning themselves in anticipation of this financial revolution. The potential of Spot Bitcoin ETFs isn't merely significant; it's somewhat monumental, offering a bold forecast into the future of digital finance.

Should the SEC decide to reject Bitcoin ETFs, it wouldn't only be obstructing undertakings from cryptocurrency-focused entities but also major fund giants.

For instance…

BlackRock, one of these prominent fund organizations, is seeking approval for a spot Bitcoin ETF, selecting COIN as its dedicated crypto custodian. As the appointed crypto custodian, COIN will be entrusted with the responsibility of storing and protecting the Bitcoin assets that substantiate the ETF. They will also extend data handling and infrastructure support to BlackRock.

SEC’s approval could potentially propel COIN's revenue and prominence in the market while positively influencing the demand and value of Bitcoin. However, if the SEC were to repudiate the proposal, it could be detrimental to COIN, causing a significant setback in their financial growth as the custodial fees would not materialize.

Bottom Line

Spot ETFs would offer several advantages to investors, chiefly offering a simplistic, straightforward avenue to trade in Bitcoin, sidestepping the intricate tasks involved in purchasing and storing the cryptocurrency. Moreover, spot ETFs are regulated investment vehicles, heightening the level of transparency and oversight not commonly found in traditional Bitcoin investments.

However, they do not come without their inherent risk factors, with theft or loss of the Bitcoin held by the ETF standing at the forefront. As these underlying assets would be stored in a crypto wallet, there is an accompanying risk of security breaches and hacking. Moreover, spot ETFs remain susceptible to Bitcoin's price volatility and fluctuations.

The cryptocurrency market lost over $2 billion in 2022, buoyed by a broader move away from risky assets. It witnessed a drastic resurgence of about 157% in 2023 due to improved investor sentiment, partly fueled by optimism about imminent Bitcoin spot ETFs. This explosive volatility impacted COIN in both directions. After tumbling 86% in 2022, the stock experienced a meteoric rise of over 300% in value in 2023.

While this surge owes some credit to positive trends within the broader cryptocurrency market, it's crucial to acknowledge the significant strides COIN has achieved on its own – independent of influences from Bitcoin or overall crypto-market momentum.

Accompanying a shift in its leadership, COIN’s ambitious business diversification initiative seeks to evolve this crypto exchange into a comprehensive financial platform, valuably equipping it for future challenges and opportunities. Moreover, 2023 saw the company amplify its international expansion ventures.

Notable is COIN's unwavering commitment to regulatory transparency. It has adopted a proactive approach to compliance in every jurisdiction where it operates. Such thorough compliance positions COIN as a compelling prospect for institutional investors, enhancing its appeal as a likely top pick for further institutional investment.

COIN is not merely primed for the inauguration of Spot Bitcoin ETFs; it is all set to redefine the standards of the crypto exchange market. Emboldened with strategic transformations in leadership, significant improvements in systems, and a sharp focus on regulatory advancements, COIN is active in the market and catalyzing its transformations.

This is not a tale of a company gearing for change but one that’s ready to redefine the industry landscape. In this arena, COIN is not just a player, but it could be a game-changer.

COIN anticipates the introduction of spot bitcoin ETFs to add billions to the crypto market capitalization and ignite fresh avenues of asset-class investments. Upon approval, COIN could profit from its significant roles as a crypto custodian and trading associate for the ETF issuers. This development would bolster its standing in the crypto sector, stimulating growth in revenues and market shares. This could attract a more extensive base of customers and partners and enable a wider range of services.

However, COIN's involvement in the spot bitcoin ETF market, though presenting clear potential for profit, does not ensure a seamless path. It could be met with intensified competition from other cryptocurrency platforms and exchanges and face regulatory challenges and operational risks.

The market, with its inherent fluctuation and volatility, might also lead to uncertainty. The value and demand for Bitcoin and other digital assets are subject to factors like supply-demand dynamics, rates of adoption, innovation trends, market sentiment, and regulatory frameworks.

Operating as a custodian of ETFs, among other functions, represents a high-cost, low-profit business. Furthermore, there's a growing trend of companies cutting out the middleman – in this case, exchanges – and establishing direct access channels for their clients and themselves, often providing less expensive alternatives.

In the grand scheme of the crypto ecosystem, no single player has yet secured a dominant passthrough hold. Brokerages armed with more financial resources harbor the incentive to take the solitary route, which could potentially leave COIN in a position where brokerages were at the dawn of the 21st century.

Given the overall scenario, investors could wait for a better entry point in COIN.

Can Wayfair (W) Outpace Amazon.com (AMZN) With a Strategic Merger in 2024?

Posted on by The INO.com Team

Reports suggest that Chinese e-commerce companies Shein and Temu may be plausible merger candidates for American home goods retailer Wayfair Inc. (W). This conjecture emerges amid a challenging period for W, which has experienced a decline in active customers and a significant 76% plunge in share price over the last three years.

A strategic merger with W could present an opportunity for both Shein and Temu to elevate their brand image beyond the "bargain basement" stereotype. More importantly, it could empower them to compete more prominently against industry leader Amazon.com, Inc. (AMZN), especially as they navigate regulatory scrutiny.

Given the recent stringent regulatory oversight aimed at businesses founded in China, a merger with W might further solidify their standing in American marketplaces.

Shein, known for its high-velocity fashion production, privately filed an Initial Public Offering in the U.S. in 2023, projecting to become a publicly traded entity by 2024. This milestone stands to make Shein one of the most valuable Chinese start-ups listed on U.S. exchanges.

Conversely, Temu serves as a broad-spectrum online marketplace offering various products, from clothing and cosmetics to electronics and homewares. A possible merger prospect could exacerbate the already intense rivalry between Shein and Temu.

Among the two, PDD Holdings – the parent company of Temu – appears better positioned for acquisition due to its substantial $197 billion market cap as compared to Shein's $66 billion.

A potential amalgamation with W could permit Temu to diversify its product portfolio and leverage W's specialist home goods proficiency. Nonetheless, Shein is believed to be a more synergistic match for W, given that W's extensive domestic logistical capabilities are likely to enhance Shein's commitment toward optimizing distribution within the U.S.

Regulatory concerns in the U.S. pose potential challenges to the possible merger between Shein or Temu and W. This complexity is further intensified as the political landscape between China and the U.S. is becoming increasingly strained, fueled by escalating concerns over Chinese influence in American investment decisions. Such issues may impact the feasibility of the proposed union on a large scale.

Now let’s delve into a comparative analysis to assess whether Wayfair could outpace Amazon after the strategic merger in 2024…

Wayfair Inc. (W)

Reflecting on the aftermath of the pandemic, 2021 marked a successful year for retailers specializing in once-popular pandemic items like stationary bikes, used cars, furniture, and pet food sold online. This was largely attributed to consumers with surplus savings ready to spend while stuck at home and supported by advantageous financing conditions.

However, online furniture retailer W has witnessed a downturn from its height of sales, now selling less than it once did at its peak. This struggle has been somewhat mitigated through strategic cost-cutting measures and financial engineering practices in certain situations.

These cost-reduction efforts have been instrumental in limiting the company's cash burn rate. W plans to minimize costs by over $1 billion. In a bid to streamline operations and boost agility, the company trimmed its global workforce by 10% - roughly 1,750 employees – in January last year.

In November 2022, W set out another deficit reduction target of a half-billion dollars. At the same time, the company endeavored to bounce back from a quarter that saw declines in revenue, active customers, and overall orders.

This recovery plan included enhancements to wholesale economics, merchandising gains, and elevating mixed-supplier services. To encourage more suppliers to use its platform, W improved its logistics network by offering better delivery speeds and competitive pricing. Coupled with vendor-funded promotions, these steps buoyed W's overall gross margins. Wall Street predicts the company to generate positive free cash flow on an annual basis in 2024.

It seems unlikely that hefty discounts will entice consumers to purchase new furniture in the immediate future. W's revenue growth has been inconsistent in recent years, and this is projected to be their third consecutive year of declining top-line results.

On the brighter side, there are signs that W is making a recovery. After nine consecutive quarters of year-on-year top-line decreases, the company recently reported total net revenue of $2.94 billion – a 3.7% year-over-year increase. Its U.S. net income increased by $132 million, marking a 5.4% year-on-year increase. However, W's adjusted loss per share lingered at $0.13.

W's active customers totaled 22.3 million as of September 30, 2023, a decrease of 1.3% year-over-year. Its long-term debt, as of September 30, 2023, stood at $3.21 billion, with a net loss of $163 million in the last quarter. With continuous refinancing of convertible debt at lower conversion prices and a higher interest rate, coupled with equity-based compensation, there comes a significant question: What will the share count amount to if W starts reporting positive net income?

Foundational to W's business model was the thrilling potential of directly selling oversized, hefty household items. However, it soon became apparent that the more traditional approach, as modernized by W’s competitors, yielded more substantial profits. This revelation paints W’s innovative idea as not altogether successful, suggesting it may yield no better results for entities such as Temu or Shein.

W looks set to bolster its international footprint and customer base through a promising merger. Given Shein and Temu's considerable generated traction within China and further markets, this merger presents a viable opportunity. Moreover, W could potentially tap into advanced technology and innovation employed by Shein and Temu, significantly in the spheres of AI, data analytics, and social media, which could enrich its customer's shopping experiences.

Analysts project W's return to profitability by 2024, markedly sooner than previous expectations. The upgraded forecast comes following the favorable response to the company's third-quarter reports. In the face of likely declining interest rates and a generally more promising economic forecast in 2024, circumstances are slowly turning favorable for W's digital business platform.

For the fiscal fourth quarter of 2023 (ended December 2023), its revenue is expected to grow 1.7% year-over-year to $3.15 billion. EPS is expected to increase 92% year-over-year but remain negative at $0.14.

Amazon.com, Inc. (AMZN)

The forthcoming merger might intensify competition for AMZN within the online furniture and home decor sector. W boasts a notable brand image and customer allegiance in this industry, while Shein and Temu possess the potential to drive increased traffic and sales to the merged platform.

AMZN could be closely tracking this competitive scenario as it faces eroding market share. To counteract this trend, AMZN has been taking strategic measures like reducing certain vendor fees with the intention of attracting more businesses from China. However, this strategy might have been implemented too late to recover the lost market share effectively.

Furthermore, the merger could undermine AMZN's competitive pricing advantage. Firms like Shein and Temu are well-regarded for their competitive pricing and discount offerings, giving W a chance to capitalize on these economies of scale and strong supplier relationships.

The synergy also represents a challenge to AMZN’s customer experience. With Shein and Temu's curated and personalized shopping features, such as 3D visualization, augmented reality, and social sharing, W has the opportunity to boost its design inspiration and customer service capabilities.

On the bright side, over the past three and five years, its revenue grew at CAGRs of 16.8% and 20.2%, respectively. Its tangible book value grew at CAGRs of 33.2% and 45.5% over the respective timeframe.

AMZN's investment in faster delivery bore fruit just before the Christmas season. In the two weeks preceding the holiday, the tech giant reportedly claimed 29% of the worldwide volume of online orders, based on data from Route, a package-tracking application that recorded some 55 million orders. This percentage marked an increase from the 21% achieved during the week of Thanksgiving.

Furthermore, current easing inflationary pressures have resulted in positive shifts in consumer sentiments, setting the stage for a potential upswing in spending. Collectively considering these elements, the ensuing months could be exceptionally profitable for AMZN.

For the fiscal fourth quarter of 2023 (ended December 2023), its revenue is expected to grow 11.3% year-over-year to $166.07 billion, while EPS is expected to increase significantly year-over-year to $0.78.

Its revenue and EPS for the fiscal first quarter (ended March 2024) are expected to increase 11.6% and 116.5% year-over-year to $142.10 billion and $0.67, respectively.

Wall Street analysts expect the stock to reach $183.28 in the next 12 months, indicating a potential upside of about 26.8%. The price target ranges from a low of $145 to a high of $220.

In comparison to the last decade, AMZN today is neither the cheapest nor the only online shopping option, especially when accounting for burgeoning international competition. To meet projected growth, AMZN must exponentially expand its international reach. As a result, past performance cannot be the sole determinant of future success.

Despite being a remarkable enterprise, aligning investment with opportune timing is crucial to generating sizable returns.

Bottom Line

It might indeed be an opportune moment to invest in e-commerce stocks broadly, but the market hasn't presented the same favor for larger-scale furniture goods and additional home décor. Elevated mortgage rates are tempering real estate transactions, thereby making it more difficult for consumers to substantiate the acquisition of new domestic adornments. This could impact W.

Should W choose to engage in a merger with either Shein or Temu, it could potentially surpass AMZN in home furnishings and décor. A merger would pave the way for new customer bases, market opportunities, and access to innovative technologies. However, significant risks such as regulatory challenges, the likelihood of cultural discord, and potential brand dilution may also arise.

Consequently, it is imperative for W to carefully balance the pros and cons related to each merger possibility while formulating a strategic, clear, and potent approach to compete with established giants like AMZN.

Can These 2 Natural Gas Stocks Heat up Your Portfolio This Winter?

Posted on by The INO.com Team

During the winter months, energy prices typically experience favorable conditions due to increased heating demand in colder weather, which widens the gap between supply and demand. The use of natural gas tends to reach its peak at the beginning of the winter season as households and office buildings turn to heaters.

The Energy Information Administration (EIA) raised U.S. natural gas consumption estimates by 230 MMcf/d to 93.28 Bcf/d for the fourth quarter of 2023 and by 240 MMcf/d to 104.22 Bcf/d for the first quarter of 2024.

Colder U.S. Conditions Drive Energy Prices Higher

Natural gas prices yesterday added to Tuesday’s gains and reported a 4-week high. Gas prices surged Wednesday on forecasts for colder U.S. temperatures, which would drive heating demand for natural gas. Forecaster Maxar Technologies said that a storm next week will bring wintry conditions to the nation’s eastern half and snow in the Midwest from June 8 to June 12.

On the other hand, the U.S. Climate Prediction Center stated that there is a greater than 55% chance the present EI Nino weather pattern will remain strong in the Northern Hemisphere through March, keeping temperatures above average and weighing on gas prices. As per AccuWeather, El Nino will limit snowfall across Canada this season in addition to causing above-normal temperatures across North America.

Last Thursday’s weekly EIA report was bullish for natural gas prices as natural gas inventories for the week ended December 22 declined by 87 Bcf to 3,577 Bcf, a larger draw than expected 79 Bcf decline; however, less than the 5-year average draw of – 123 Bcf.

As of December 22, natural gas inventories were up 12.1% year-over-year and 10% above their 5-year seasonal average, signaling adequate gas supplies.

Record U.S. Oil and Gas Production and Exports

Winter weather can be a significant tailwind for natural gas prices, with colder temperatures more supportive of heating demand, particularly from residential and commercial segments. But with high gas inventories, a price rally may not persist this winter.

U.S. oil and gas production has grown at a much faster pace, offsetting most of the OPEC+ efforts to push up energy prices by coordinated supply cuts.

Earlier, various OPEC+ oil producers announced voluntary production cuts totaling 2.2 million barrels per day (bpd) for the first quarter of 2024. Leading the cuts is OPEC's kingpin and the world’s biggest crude exporter, Saudi Arabia, which extended a voluntary oil output cut of 1 million bpd, priorly intended by the end of December 2023.

The U.S. is currently producing more than 13 million bpd of crude oil and is headed to a continued increase in the short and medium term. According to data from the EIA, U.S. output hit a new monthly record of 13.252 million bpd in September 2023 and kept the pace at 13.248 million bpd in October. As a result, the country’s crude oil exports also surged.

Meanwhile, U.S. LNG exports are breaking records. The U.S. exported more LNG during the first half of 2023 than any other nation, the EIA reported earlier this year. The average LNG exports during this period were 11.6 billion cubic feet per day (Bcf/d), up 4% from the first half of 2022. Also, October 2023 witnessed record LNG shipments, as per EIA data.

2 Natural Gas Stocks Which Could Benefit from Strong Winter Demand

With a $40.35 billion market cap, Cheniere Energy, Inc. (LNG) is an energy infrastructure company that mainly engages in liquified natural gas (LNG) related businesses in the U.S. The company owns and operates the Sabine Pass LNG terminal in Cameron Parish, Louisiana and the Corpus Christi LNG terminal near Corpus Christi, Texas.

In addition, Cheniere Energy owns the Creole Trail pipeline, a 94-mile pipeline interconnecting the Sabine Pass LNG terminal with several interstate pipelines and operates the Corpus Christi pipeline, a 21.5-mile natural gas supply pipeline interconnecting the Corpus Christi LNG terminal with various interstate and intrastate natural gas pipelines.

On November 29, 2023, LNG and Cheniere Energy Partners, LP (CQP) announced that Sabine Pass Liquefaction Stage V, LLC entered a long-term Integrated Production Marketing (IPM) gas supply agreement with ARC Resources U.S. Corp., a subsidiary of ARC Resources Ltd. (ARX), a prominent natural gas producer in Canada.

Under the IPM, ARC Resources agreed to sell 140,000 MMBtu per day of natural gas to SPL Stage 5 for 15 years, commencing with commercial operations of the first train of the Sabine Pass Liquefaction Expansion Project. This deal will allow Cheniere to deliver high quantities of Canadian natural gas to Europe.

“We are pleased to build upon our existing long-term relationship with ARC Resources, and further demonstrate Cheniere’s ability to construct innovative solutions that help meet the needs of customers and counterparties along the LNG value chain while delivering value to our stakeholders,” said Jack Fusco, Cheniere’s President and CEO.

On November 2, LNG’s subsidiary, Cheniere Marketing, LLC, entered a long-term liquified natural gas sale and purchase agreement (SPA) with Foran Energy Group Co. Ltd, a leading natural gas company based in China.

Under the SPA, Foran will purchase nearly 0.9 mtpa of LNG for 20 years from Cheniere Marketing on a free-on-board basis for a purchase price indexed to the Henry Hub price, plus a fixed liquefaction fee. Deliveries will commence upon the start of commercial operations of the second train of the SPL Expansion Project in Louisiana.

Also, on October 30, Cheniere’s Board of Directors declared a quarterly cash dividend of $0.435 ($1.74 annualized) per common share, up nearly 10% from the previous quarter, paid on November 17, 2023, to shareholders of record as of the close of business on November 9, 2023. The dividend increase reflects the company’s commitment to return enhanced value to its shareholders.

LNG’s trailing-12-month gross profit margin of 86.74% is 83.3% higher than the 47.32% industry average. Likewise, its trailing-12-month EBITDA margin and net income margin of 85.84% and 50.83% are considerably higher than the industry averages of 34.76% and 13.93%, respectively.

Furthermore, the stock’s trailing-12-month ROTC and ROTA of 41.15% and 29.82% favorably compared to the respective industry averages of 9.30% and 7.49%.

In the third quarter that ended September 30, 2023, LNG reported total revenues of $4.16 billion, while its LNG revenues came in at $3.97 billion. Its income from operations was $2.76 billion, compared to a loss from operations of $3.02 billion in the previous year’s quarter.

Also, the company’s net income attributable to common stockholders came in at $1.70 billion, or $7.03 per share, compared to a net loss attributable to common stockholders of $2.39 billion, or $9.54 per share in the prior year’s period, respectively.

During the quarter, the company generated a distributable cash flow of approximately 1.2 billion. As of September 30, 2023, Cheniere’s cash and cash equivalents stood at $3.86 billion, compared to $1.35 billion as of December 31, 2022.

For the full year 2023, the management expects consolidated adjusted EBITDA to be between $8.30 and $8.80 billion. The company’s distributable cash flow is projected to be in the range of $5.80-$6.30 billion.

CEO Jack Fusco commented, “Persistent volatility in commodity markets continues to reinforce the value of our commercial offering and the stability and visibility of our cash flows, and we are confident in achieving full year 2023 results at the high end of our guidance ranges.

“Looking ahead to 2024, construction on Corpus Christi Stage 3 continues to progress ahead of plan, and I am optimistic first LNG production from Train 1 will occur by the end of 2024,” Fusco added.

Analysts expect LNG’s EPS for the fiscal year (ended December 2023) to increase 519.5% year-over-year to $34.94. Further, the company’s EPS is expected to grow 23.3% per annum over the next five years. Moreover, Cheniere topped the consensus EPS estimates in all four trailing quarters, which is impressive.

Shares of LNG have surged more than 10% over the past six months and approximately 20% over the past year.

Another stock, Pioneer Natural Resources Company (PXD), could benefit from solid natural gas demand during the winter season. PXD operates as an independent oil and gas exploration and production company in the U.S. It explores for, develops, and produces oil, natural gas liquids (NGLs), and gas. The company has operations in the Midland Basin in West Texas.

During the third quarter of 2023, Pioneer’s continued operational excellence in the Midland Basin allowed the company to place 95 horizontal wells on production. More than 100 wells with lateral lengths of 15,000 feet or greater were placed for production during the first three quarters of last year.

In total, the company has more than 1,000 future locations with 15,000-foot lateral lengths in its drilling inventory.

On November 2, PXD’s Board of Directors declared a quarterly base-plus-variable cash dividend of $3.20 per common share, comprising a $1.25 base dividend and a $1.95 variable dividend. This represents a total annualized dividend yield of nearly 5.4%. The dividend was paid on December 22, 2023, to stockholders of record at the close of business on November 30, 2023.

PXD’s trailing-12-month gross profit margin of 52.23% is 10.4% higher than the 47.32% industry average. Moreover, its trailing-12-month EBITDA margin and net income margin of 48.07% and 26.22% compared to the industry averages of 34.76% and 13.93%, respectively.

Additionally, PXD’s trailing-12-month ROCE, ROTC, and ROTA of 22.32%, 14.57%, and 14.04% are higher than the respective industry averages of 19.99%, 9.30%, and 7.49%. The stock’s trailing-12-month levered FCF margin of 11.96% is 104.1% higher than the 5.86% industry average.

For the third quarter that ended September 30, 2023, PXD’s total production averaged 721 thousand barrels of oil equivalent per day (MBOEPD), near the top end of quarterly guidance. The company’s revenues and other income from the oil and gas segment came in at $3.46 billion. Cash flow from operating activities during the quarter was $2.10 billion, leading to a solid free cash flow of $1.20 billion.

However, the company’s net income attributable to common shareholders was $1.30 billion and $5.41 per share, down 34.4% and 31.8% from the prior year’s quarter, respectively.

As per the updated full-year 2023 guidance, Pioneer increased the midpoints of full-year 2023 oil and total production guidance with ranges of 370-373 MBOPD and 708-713 MBOEPD, respectively. But it decreased drilling, completions, facilities and water infrastructure capital guidance to $4.375-$4.475 billion.

Also, the company lowered full-year 2023 capital guidance for exploration, environmental and other capital to $150 million.

Street expects PXD’s revenue and EPS to decline 19.8% and 30.5% year-over-year to $19.50 billion and $21.25, respectively. But for the fiscal year 2024, the company’s revenue and EPS are expected to grow 14.8% and 8.8% from the prior year to $22.38 billion and $23.12, respectively.

PXD’s stock has gained nearly 12% over the past six months and more than 10% over the past year.

Bottom Line

Colder temperatures prompt households and office buildings to rely more heavily on natural gas as a heating fuel. As a result, natural gas prices witness a surge.

However, with natural gas inventors still above the five-year average, the prices may not witness a sustained rally this winter.

Despite relatively weaker prices, oil and natural gas production will continue to climb, creating ample growth opportunities for energy infrastructure companies. Amid this backdrop, investors could consider adding fundamentally sound energy stock LNG to their portfolio for potential gains.

However, given its mixed last reported financials and bleak near-term outlook, it could be wise to wait for a better entry point in PXD.

Buy Alert: How BlackRock Partnership Positions JPM Stock in Cryptocurrency Surge

Posted on by The INO.com Team

Bitcoin is the digital world's non-sovereign reserve currency and serves as a unique way to diversify portfolios, consequently enhancing total risk-adjusted returns. However, despite numerous possibilities for capitalizing on this preeminent virtual asset, there remained one notable deficiency: the creation of a spot bitcoin ETF.

The pursuit of a spot bitcoin ETF has been a considerable endeavor. The SEC (Securities and Exchange Commission) has denied all 33 previous applications spanning across multiple filers ever since the Winklevoss twins first initiated their bid over a decade ago.

However, due to recent developments like BlackRock Inc (BLK) – managing an incredible $8.5 trillion in assets under management (AUM) – joining the fray in June, Grayscale's court triumph against the SEC rescinding its past application disapproval, followed by the fresh approvals of a leveraged Bitcoin futures ETF and Ethereum futures ETFs, we have come closer than ever.

Further adding to this progress, according to recently disclosed data, BLK has submitted an application for a spot Bitcoin ETF despite unwavering prior rejections from the SEC.

The SEC has previously spurned applications on the basis that Bitcoin's decentralization and volatility could hinder fund managers from safeguarding investors against market manipulation. Currently, all U.S.-traded bitcoin ETFs are tied to futures contracts traded on the Chicago Mercantile Exchange.

In its application, BLK announced JPMorgan Securities as one of the "Authorized Participants" for its proposed Bitcoin ETF.

U.S. banks like JPMorgan Chase & Co. (JPM), governed by strict regulations, currently cannot hold Bitcoin directly. However, the proposed structural change to spot bitcoin ETFs could alter this scenario. The modification would enable APs to create new shares within the fund using cash instead of strictly relying on cryptocurrency. This paves the way for these regulated banking entities that are unable to hold crypto assets directly.

Authorized participants generally oversee the creation and redemption of ETF shares in the primary market, ensuring the ETF’s price aligns with the value of the underlying securities, in this case, Bitcoin.

Securing authorized-participant agreements is typically straightforward for ETF issuers, yet concerns were raised that bitcoin funds could face challenges due to cryptocurrencies being a relatively new asset class.

If approved, JPM could potentially serve this role for the first such ETF in the U.S., a move anticipated to attract billions in institutional capital and stimulate the cryptocurrency market.

Critics have been quick to note the contradiction in JPM's involvement, given CEO Jamie Dimon's repeated criticism of Bitcoin, advocating for a government ban on cryptocurrencies due to concerns over their legitimacy.

However, Bloomberg Intelligence analysts suggest the SEC could approve spot Bitcoin ETF proposals committing to cash-only creations and redemptions, provided there are agreements with authorized participants. They estimate a 90% probability of SEC approval, with several firms expected to launch a spot Bitcoin ETF as early as January.

A spot bitcoin ETF is an investment tool that enables investors to gain exposure to the price fluctuations of bitcoin in their typical brokerage accounts. Unlike derivative contracts, this ETF directly invests in bitcoin as the underlying asset.

APs are economically motivated to leverage arbitrage opportunities in the market, a process involving the trading of ETF shares or underlying securities when minor price discrepancies arise between the two.

In scenarios where ETF shares trade at a premium or discount relative to bitcoin's actual price, APs step up to either create or redeem ETF shares in larger volumes. This action essentially arbitrages any difference, aligning the ETF share price with Bitcoin's cost.

Spot bitcoin ETFs present a spectrum of possibilities for both retail and institutional investors looking to speculate on bitcoin. They circumvent the technical complications of managing a cryptocurrency wallet and alleviate security concerns related to the safeguarding of private keys.

The appointment of JPM as an AP could positively influence the bank's share value, as it demonstrates the bank's readiness to engage in the burgeoning cryptocurrency sector and opens possibilities for a new stream of revenue via arbitrage and liquidity provision.

Nevertheless, the financial performance of JPM is not solely determined by this engagement. It is also contingent on external factors like the SEC’s verdict on approving the spot bitcoin ETF, the market's demand and mood toward bitcoin and other cryptocurrencies, and the overall regulatory and competitive landscape of the banking industry. These elements could concurrently sway the stock performance of JPM.

Bottom Line

The potential for a U.S. spot bitcoin ETF cannot be understated, given the vast expanse of the American capital market. According to figures from the SIFMA, American-held assets represent an impressive 40% of total global fixed-income assets and equity market cap. Moreover, ETFs in the U.S. are more prevalent as part of the total asset picture than they are in other regions. They make up 12.7% of the equity assets in America, compared to 8.5% in Europe and 4.4% in the Asia-Pacific.

This equates to a U.S. ETF market valued at around $7 trillion, significantly larger than Europe’s $1.5 trillion or Asia-Pacific’s $1 trillion markets. Judging from another angle, considering that the assets handled by broker-dealers, banks, and registered investment advisors (RIAs) in the U.S. reach into the trillions, a minute fraction of these managed and brokerage assets transitioning into a spot bitcoin ETF could significantly affect the financial landscape.

It's also worth highlighting that the U.S., according to Chainalysis's Global Crypto Adoption Index, ranks fourth in crypto adoption. This high level of acceptance might translate well into investment. Banking institution JPM's openness to engaging with this burgeoning market might lead to advantageous outcomes.

However, prospective investors should consider various additional factors. For instance, JPM's recent earnings were boosted by Republic's purchase, an influence expected to wane in upcoming quarters.

Notably, card delinquencies rose in November, potentially impacting both the card business and JPM's overall financial standing adversely. Commercial R/E, Sovereign Debt, and recession reports add complexity when attempting to reconcile them with JPM's high stock value.

The bank has recorded two instances of flat dividend growth over the 12 quarters, while inflation rates were significantly high. JPM has not been a reliable dividend growth investment over the past five years, with growth approximating only about 10%.

Investors in search of steady returns may want to tread carefully. JPM's forward dividend yield currently stands at 2.44%, lower than its four-year average yield of 2.91% and below the 3.32% sector median.

Moreover, the relatively low Price/Earnings ratio of 10.34x suggests market apprehension.

Given this scenario, investors should wait for a better entry point in the stock.

2024 Buy or Sell: Analyzing the Volatile Journey of Plug Power (PLUG) Stock

Posted on by The INO.com Team

Plug Power Inc.’s (PLUG) shares have taken shareholders on a roller-coaster ride in recent years. Nearly five years earlier, the stock traded for around $1 per share when no one cared much about it. During 2020 and 2021, high investor enthusiasm led to the stock surging above $70. But it has been on a downtrend since then, currently trading under $5.

Shares of PLUG finished at $3.22 on November 10, 2023, their lowest level since April 2020. The company’s shares dived on its “going concern” warning and tax credit fight that could cause its hydrogen industry efforts to go wasted.

The stock has plunged nearly 55% over the past six months and more than 60% over the past year.

Now, let’s discuss the key factors that could impact PLUG’s performance in the near term:

Trembling Liquid Hydrogen Market

PLUG raised a “going concern” warning regarding a severely constrained liquid hydrogen market in North America. The market has been dealing with several frequent force majeure events, resulting in volume constraints, which have delayed Plug’s deployments and service margin improvements.

The hydrogen fuel-cell marker has been grappling with liquidity issues and has lost more than half of its market capitalization since the start of 2023. Plug Power’s 2023 overall financial performance has been negatively impacted by “unprecedented” supply challenges in the hydrogen network in North America.

“The company is projecting that its existing cash and available for sale and equity securities will not be sufficient to fund its operations through the next twelve months,” PLUG said.

PLUG will require additional capital to fund its operations. The company added that it was pursuing various debt capital and project-financing solutions, including corporate debt and a loan program from the U.S. Department of Energy.

Stringent Hydrogen Regulations

The hydrogen producer and fuel-cell maker’s future is heavily dependent on support from the federal government. In November 2023, PLUG was counting on what later turned out to be delayed “government support through a potential loan and clarity on hydrogen tax credits.”

The tax credit could apply to companies, including Plug Power, that use green hydrogen, which is produced by splitting water via electrolysis and could de-carbonize the shipping and heavy industry sectors.

On December 22, the White House unveiled highly anticipated strict hydrogen regulations in support of environmentalists but opposed by business and clean power industry groups. 

Plug Power labeled the new rules on how hydrogen projects can qualify for a tax credit “disappointing” but also expects restrictions around a critical measure of Joe Biden’s signature climate law to get looser once the Treasury Department finalizes them.

“We do expect the regulations to loosen up,” Andy Marsh, president and chief executive officer of Plug Power, said in an interview on Bloomberg Television. “I’ve talked to many senators who tell me it will get easier — not harder.” 

In order to qualify for the tax credit worth as much as $3 per kilogram, hydrogen projects would need to use electricity from newly built clean energy sources and, beginning in 2028, ensure that production occurs during the same hours as those clean sources were operating. The Biden administration is taking public comment on the requirements, which could change before being finalized.  

Marsh, in his interview, said the company’s modeling showed these regulations would reduce U.S. hydrogen output by 70% by 2030. Plug and other hydrogen producers are planning an aggressive effort to “help straighten the regulations out,” he added.

According to Northland analyst Abhishek Sinha, while the policy document has nuances suggesting a possible pathway for PLUG’s plans to qualify for credits, some of its plans could come “under direct scrutiny.”

“Georgia plant could be entangled in additionality factor but PLUG believes RECs (renewable energy credits/certificates) should qualify for PTC,” Sinha added. “Although Texas plant gets power supply from wind farm, the issue for PLUG would be to meet the hourly matching requirements after 2028. NY plant gets hydro power but there is ambiguity around that too in terms of eligibility. All in all, hourly matching is the most concerning factor for PLUG.”

Deteriorating Financial Performance

For the third quarter that ended September 30, 2023, PLUG reported net revenue of $198.71 million, missing analysts’ estimate of $221.73 million. This compared to the net revenue of $157.99 million in the same quarter of 2022. The company’s gross loss widened by 199.5% year-over-year to $137.97 million.

The hydrogen producer’s operating loss came in at $273.97 million, compared to $159.75 million in the prior year’s quarter. Its loss before income taxes worsened by 70.3% year-over-year to $288.21 million. PLUG’s net loss widened by 66% from the previous year’s quarter to $283.48 million.

Plug Power posted a net loss per share of $0.47, compared to $0.30 in the same period last year. This also missed the consensus loss per share of $0.31.

Furthermore, PLUG’s cash and cash equivalents stood at $110.81 million as of September 30, 2023, compared to $690.63 million as of December 31, 2022. The company’s current assets were $2.24 billion versus $3.31 billion as of December 31, 2022.

As of September 30, 2023, the company’s current liabilities increased to $930.59 million, compared to $635.28 million as of December 31, 2022.

“This was a difficult quarter,” CEO Andy Marsh told investors during the company’s earnings call.

“Over the past several months, there have been enormous challenges associated with the availability of hydrogen, primarily due to downed plants, including our Tennessee facility, and temporary plant outages across the entire hydrogen network,” Marsh added. “Additionally, the price of these stations for hydrogen has been over $30 per kilogram at the pump, about twice the normal price.”

Mixed Analyst Estimates

Analysts expect PLUG’s revenue for the fourth quarter (ended December 2023) to grow 82.9% year-over-year to $403.75 million. However, the company is expected to report a loss per share of $0.32 for the same quarter. Also, Plug Power has missed the consensus EPS estimates in each of the trailing four quarters, which is disappointing.

For the fiscal year 2023, Street expects PLUG’s revenue and loss per share to widen 52.9% and 21.6% year-over-year to $1.07 billion and $1.52, respectively. In addition, the company’s revenue for the fiscal year 2024 is expected to increase 56.8% from the previous year to $1.68 billion.

But analysts expect the company to report a loss per share of $0.89 for the ongoing year.

Elevated Valuation

In terms of forward EV/Sales, PLUG is currently trading at 2.90x, 58.6% higher than the industry average of 1.83x. Likewise, the stock’s forward Price/Sales of 2.52x is 73.7% higher than the industry average of 1.45x.

Decelerating Profitability

PLUG’s trailing-12-month gross profit margin of negative 32.84% compared to the 30.28% industry average. Moreover, the stock’s trailing-12-month EBITDA margin and net income margin of negative 92.24% and negative 106.74% are favorably compared to the industry averages of 13.73% and 6.09%, respectively.

Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 24.57%, negative 11.57% and negative 17.42% compared to the respective industry averages of 12.30%, 7.05%, and 4.99%. Also, its trailing-12-month levered FCF margin of negative 158.88% compared to the industry average of 5.98%.

Rating Downgrades

PLUG’s stock has already been beaten up; however, Morgan Stanley sees more concerns for the clean energy company’s future. On December 6, Morgan Stanley analyst Arthur Sitbon downgraded Plug’s shares to Underweight from Equal Weight and slashed his price target on the stock from $3.50 to $3.

Sitbon added that Plug Power is plagued by “liquidity concerns and worsening hydrogen economics.”

Another Morgan Stanley analyst, Andrew Percoco, sees a “negative risk-reward” for PLUG shares. “Even after the underperformance in 2023, we see significant risk around PLUG’s business model given the operational challenges that the company has faced in commercializing its first few green hydrogen facilities,” Percoco said.

He added, “On paper, PLUG’s strategy makes sense to us, but we have reduced confidence in the company’s ability to execute on that strategy barring a potential dilutive capital raise and a near-perfect execution going forward.”

Analysts at JPMorgan, Oppenheimer, and RBC Capital also downgraded the stock and lowered their price targets.

“While we believe Plug Power can cycle past its current cash flow issues, the current operating and capital markets environments are challenging and we believe PLUG shares are likely to be range bound over the next several quarters until clarity around its balance sheet are sorted out,” said J.P. Morgan analyst Bill Peterson.

The analyst downgraded PLUG’s stock to Neutral from Overweight.

Bottom Lin

PLUG reported significant earnings miss in the third quarter of 2023. The hydrogen fuel cell maker’s higher-than-expected losses were hit by “unprecedented supply challenges” in the hydrogen network in North America. The company further projected its potential inability to fund its operations over the next 12 months amid supply constraints and a severe cash burn rate.

Also, the company will likely be affected by the proposed hydrogen tax rules. PLUG CEO Andy Marsh dubbed the new rules on how hydrogen projects can qualify for a tax credit “disappointing.”

Several analysts downgraded PLUG’s stock and cut their price targets, given concerns about mounting losses, funding requirements, and supply chain disruptions, which have dampened Wall Street's sentiment about the clean energy company.

Given Plug Power’s dismal financial performance, declining profitability, high cash burn rate, elevated valuation, and bleak near-term outlook, it could be wise to avoid this stock now.