Author: The INO.com Team

AMD and GOOGL Pull Back from Highs—Here’s Why It’s Time to Buy

Posted on by The INO.com Team

The recent market volatility has created a golden opportunity for investors eyeing two tech giants: Alphabet Inc. (GOOGL) and Advanced Micro Devices, Inc. (AMD). Both companies have seen their stock prices fall considerably from their recent highs. While that might seem worrying, this dip offers an attractive entry point for investors, especially given the long-term growth potential of both companies, driven by advancements in artificial intelligence (AI) and data centers.

With that in mind, let’s explore the fundamentals of these stocks in detail:

Alphabet Inc. (GOOGL)

With a current market cap of $2.04 trillion, Google’s parent company is known for its pioneering internet-related services and products. While the stock has been weighed down by antitrust concerns, many investors are overlooking the company’s long-term growth prospects and strong financials. GOOGL’s valuation particularly looks quite attractive, when you consider its strong financial performance.

In the fiscal 2024 second quarter ended June 30, 2024, GOOGL reported revenues of $80.74 billion, up 13.6% year-over-year. Its income from operations grew 25.6% from the prior year’s quarter to $27.43 billion with a margin of 32%. The company’s biggest revenue driver continues to be its Google Advertising segment, which brought in $64.62 billion. But that’s not the only bright spot.

Google Cloud, which ranks as the third-largest cloud service provider, is expanding at a rapid pace. Cloud revenue surged 29% year-over-year to $10.3 billion, far outpacing the company’s overall growth. As more businesses adopt Google Cloud, particularly for AI-related purposes, this segment could become a larger piece of the pie over time. Furthermore, the company owns the two most popular websites: Google and YouTube, both of which are expected to fuel revenue growth over the long term.

On the bottom line, its net income and earnings per share came in at $23.62 billion and $1.89, representing increases of 28.6% and 31.3% year-over-year, respectively. Its EPS came above the analysts’ estimate of $1.84 by 2.5%. In addition, the tech company’s cash and cash equivalents amounted to $27.23 billion as of June 30, 2024, compared to $24.05 billion as of December 31, 2023.

Street expects GOOGL’s revenue and EPS for the fiscal third quarter (ended September 2024) to increase 12.5% and 18.7% year-over-year to $86.26 billion and $1.84, respectively. Also, the company has topped the consensus EPS and revenue estimates in all four trailing quarters.

GOOGL declined about 13% below its 52-week high. The stock is currently trading at a forward price-to-earnings (P/E) ratio of 21.72, which is a 15.2% discount to its own 5-year average. Besides, GOOGL’s trailing-12-month EBITDA margin of 35.18% is 93.2% higher than the 18.21% industry average. Likewise, the stock’s trailing-12-month net income margin, ROCE, and ROTC of 26.70%, 30.87%, and 20.34% compare to the industry averages of 3.08%, 3.44%, and 3.72%, respectively.

Despite the stock’s recent drop and ongoing regulatory concerns, the company’s long-term potential remains strong. Over the past year, the stock has climbed more than 23% and is up nearly 18% so far in 2024. With a projected upside of 21.8%, GOOGL currently has a consensus rating of “Strong Buy.” This dip offers a great opportunity for investors to scoop up shares at a discount ahead of the tech giant’s Q3 earnings report, expected in late October.

Advanced Micro Devices, Inc. (AMD)

Based in Santa Clara, California, Advanced Micro Devices has been at the forefront of innovation in high-performance computing, graphics, and visualization technologies. The company has firmly established itself as a formidable player in the GPU market, particularly excelling in chips tailored for AI workloads.

As AMD gains significant momentum in the data center space, there is strong potential for its current $262 billion valuation to grow even further. Despite the recent 25% dip in its stock price, AMD’s long-term growth prospects remain robust, offering a prime opportunity for investors to buy in at a discounted price.

AMD’s influence, however, extends beyond hardware. The company has been expanding its presence in AI software as well. In June, AMD introduced its groundbreaking Ryzen™ AI 300 Series processors, which are equipped with the world’s most powerful Neural Processing Unit (NPU). These processors are designed to bring AI capabilities directly to next-generation PCs, enabling AI-infused computing to seamlessly integrate into everyday tasks and applications. Additionally, the next-gen AMD Ryzen™ 9000 Series processors for desktops solidify AMD’s position as a leader in performance and efficiency for gamers, content creators, and prosumers alike.

Moreover, the company has outlined a comprehensive roadmap for its Instinct accelerator series, promising to deliver cutting-edge AI performance and memory capabilities across each generation. With the imminent release of the AMD Instinct MI325X accelerator in Q4 2024 and the upcoming launch of the MI350 series, powered by AMD’s new CDNA™ 4 architecture in 2025, AMD is poised to deliver up to a 35x increase in AI inference performance compared to its previous iterations.

In the second quarter that ended June 30, 2024. AMD’s non-GAAP revenue increased 9% year-over-year to $5.84 billion. Its data center revenue surged 115% year-over-year to $2.83 billion, accounting for nearly half of its total revenue.

The Mi300 series brought in over $1 billion in quarterly revenue for the first time, with its customer base expanding as Microsoft became the first cloud provider to offer general availability for the Instinct Mi300X. As AI applications continue to drive demand for high-performance data center solutions, AMD is well-positioned to see its profitability climb, given the higher margins typically associated with this segment.

Moreover, the company’s non-GAAP operating income grew 18.4% from the year-ago value to $1.26 billion. AMD’s non-GAAP net income and EPS stood at $1.13 million and $0.69, up from $948 million and $0.58, respectively, recorded last year.

Analysts expect its revenue and EPS for the current year (ending December 2024) to increase 12.9% and 27.7% year-over-year to $25.61 billion and $3.38, respectively. If AMD can exceed expectations, the stock could experience significant gains in the coming months. Earlier this year, the company projected $4 billion in AI chip sales for 2024, representing about 15% of its expected revenue.

AMD’s trailing-12-month EBITDA and net income margins of 17.38% and 5.82% are 72.3% and 56.2% above their respective industry averages of 10.09% and 3.72%. After a nearly 30% decline from its 52-week high, AMD is trading at 47.21x forward non-GAAP P/E, which is reasonable considering its AI prospects. Moreover, with the stock already up 57% over the past year, there’s potential for even more significant gains in 2025 and beyond. Thus, investors looking for long-term growth might consider this as a strategic entry point before the market fully prices in its potential.

How China’s Stimulus Could Affect Tech Stocks Globally

Posted on by The INO.com Team

After months of sluggish economic growth and fears of missing its growth targets, China has unveiled a sweeping set of stimulus measures aimed at reviving its economy. These policies included cuts to interest rates, loans to investors and companies for stock buybacks, and promises of substantial fiscal support. The People’s Bank of China’s (PBOC) coordinated efforts are aimed at reducing borrowing costs and boosting confidence in an economy struggling with issues like the ongoing property crisis and high youth unemployment.

Despite some analysts questioning the long-term sustainability of the stimulus, the market has responded with enthusiasm. Mainland China's CSI 300 Index surged 8.5%, marking its best performance since 2008, while Hong Kong's Hang Seng Index rose by 4.2%.

As these aggressive policies aim to jump-start the struggling economy, the impact could reach far beyond China's borders, with global tech stocks poised to benefit significantly. Companies like Apple Inc. (AAPL), NVIDIA Corporation (NVDA), Taiwan Semiconductor Manufacturing Company Limited (TSM), and QUALCOMM Incorporated (QCOM) rely on China not only for manufacturing but also as a major consumer market. With lower interest rates and improved liquidity in China, demand for tech products could surge, directly benefiting these tech giants.

Furthermore, the PBOC’s promise of potential fiscal stimulus adds another layer of optimism. If China follows through on its hints of trillion yuan-level spending, particularly in infrastructure and technology sectors, it could further boost global tech companies that provide critical components for these developments.

Many are drawing parallels to 2008 when China’s swift and massive stimulus response to the global financial crisis jump-started not only its economy but also helped boost global demand. However, that stimulus left China with long-term challenges, including local government debt, overcapacity, and excess housing.

While some investors remain cautious after past false starts, the current stimulus package has injected new optimism into the market. Tech stocks, in particular, offer an attractive opportunity as lower interest rates make them more appealing for investors seeking higher returns. Therefore, fundamentally sound stocks like AAPL, NVDA, TSM, and QCOM could be worth considering for those looking to tap into the potential upside driven by China’s recovery efforts.

Stock to Hold:

Apple Inc. (AAPL)

With China being one of Apple's largest markets for premium tech products, the country’s economic recovery could stimulate demand for iPhones, MacBooks, and other high-end devices. Lower interest rates and improved liquidity might encourage consumers to invest in Apple’s premium offerings, further driving the company's revenue in this region.

For the third quarter of fiscal 2024, which ended June 29, 2024, AAPL’s total net sales increased 4.9% year-over-year to $85.78 billion, with $14.73 billion in sales from Greater China. Its gross margin rose 8.9% from the year-ago value to $39.68 billion, while its operating income came in at $25.35 billion, up 10.2% year-over-year. On the bottom line, AAPL’s net income and EPS amounted to $21.45 billion and $1.40, representing increases of 7.9% and 11.1%, respectively, from the prior year’s quarter.

Street expects AAPL’s revenue for the current year (ended September 2024) to increase marginally from the prior year to $390.52 billion, while its EPS is expected to grow by 9.2% year-over-year to $6.69. For the fiscal year 2025, both revenue and EPS are anticipated to reach $419.84 billion and $7.41, indicating a 7.5% and 10.7% year-over-year growth, respectively.

Shares of the dominant tech player have surged more than 36% over the past year and approximately 21% year-to-date. Also, its 12-month price target of $248.07 reflects a 6.5% potential upside.

However, while the outlook is promising, investors should remain cautious of geopolitical tensions that could affect production and sales. Ongoing U.S.-China trade disputes may disrupt Apple’s supply chain, leading to increased costs or delays. As Apple relies heavily on Chinese manufacturing, any escalation in tensions could pose risks to its market performance.

Stocks to Buy:

NVIDIA Corporation (NVDA)

With the frenzy around Artificial intelligence (AI) in the stock market, the AI darling Nvidia has been on an impressive run this year. The stock has surged over 145% year-to-date and nearly 179% in the past 12 months, thanks to the robust demand for its graphics processing units (GPUs), which help run and train AI algorithms.

Nvidia’s revenue for the second quarter that ended July 28, 2024, increased 122% year-over-year to $30.04 billion and exceeded the analysts’ expectations of $28.75 billion. The company's bottom line also remained buoyant, with operating income surging 174% from the year-ago value to $18.64 billion. NVDA’s non-GAAP net income amounted to $16.95 billion or $0.68 per share, compared to $6.74 billion or $0.27 per share in the previous year’s quarter, respectively.

Moreover, analysts remain bullish on the chipmaker’s long-term prospects. For the fiscal year ending January 2025, NVDA’s revenue and EPS are expected to grow by 106.1% and 119.2% from the prior year to $125.54 billion and $2.84, respectively.

Furthermore, out of 42 analysts that rated NVDA, 39 rated it Buy, while three rated it Hold. The 12-month median price target of $152.44 indicates a 25.5% upside potential from the last closing price. As China accelerates its focus on artificial intelligence (AI) and high-performance computing, this stock could boost your portfolio returns significantly.

Taiwan Semiconductor Manufacturing Company Limited (TSM)

As China's tech sector surges, demand for semiconductors is set to soar, potentially contributing nearly 19% to the country’s GDP by 2026. Headquartered in Hsinchu City, Taiwan, TSM manufactures, tests, and markets integrated circuits and other semiconductor products globally. Its products are used in automotive electronics, high-performance computing, and mobile device markets.

TSM’s net sales increased 40.1% year-over-year to NT$673.51 billion ($21.25 billion) in the second quarter that ended June 30, 2024. Its gross profit grew 37.6% from the prior year’s quarter to NT$358.13 billion ($11.29 billion), while its income from operations came in at NT$286.56 billion ($9.04 billion), up 41.9% year-over-year. In addition, the company’s net income and EPS increased 36.3% year-over-year to NT$247.85 billion ($7.82 billion) and NT$9.56, respectively.

The consensus EPS estimate of $6.60 for the current year ending December 2024 represents a 27.4% improvement year-over-year. The consensus revenue estimate of $88.40 billion for the same period indicates a 29.1% increase from the prior year.

Moreover, the stock has gained more than 99% over the past year, which is impressive. Its 12-month price target of $205 reflects an 18.4% potential upside.

QUALCOMM Incorporated (QCOM)

QCOM specializes in foundational technologies for the wireless industry. The company operates through three segments: Qualcomm CDMA Technologies; Qualcomm Technology Licensing; and Qualcomm Strategic Initiatives.

QCOM’s revenue increased marginally year-over-year to $9.39 billion in the fiscal second quarter (ended March 24, 2024). Its non-GAAP net income grew 14.1% from the year-ago value to $2.76 billion, while its EBIT rose 31.8% year-over-year to $2.49 billion over the period. The company’s non-GAAP EPS increased 13.5% from the year-ago value to $2.44.

Buoyed by its strong financial performance, the company paid a quarterly dividend of $0.85 per common share to its shareholders on September 26, 2024. QCOM pays an annual dividend of $3.40, which translates to a 2% yield on the current price. Plus, it has a payout ratio of 34.1%.

Street expects QCOM’s revenue for the fourth quarter (ended September 2024) to increase 13.8% from the prior year to $9.86 billion. Its EPS for the same period is expected to grow by 26.1% year-over-year to $2.55. It is no surprise that the company has topped the revenue and EPS estimates in each of the trailing four quarters.

Over the past year, the stock has returned nearly 50%. Moreover, out of 21 analysts that rated QCOM, 13 rated it Buy, while seven rated it Hold. The 12-month median price target of $218.25 indicates a 31.3% upside potential from the last closing price.

Can NVDA’s Share Buybacks and AI Innovation Drive the Next Rally?

Posted on by The INO.com Team

NVIDIA Corporation (NVDA) has undoubtedly been one of the hottest large-cap stocks this year, surging over 150% year-to-date and more than 195% in the past 12 months. This stellar performance is driven by the massive demand for its graphics processing units (GPUs), which help run and train AI algorithms.

For the second quarter that ended July 28, 2024, Nvidia’s revenue increased 122% year-over-year to $30.04 billion and 15% from the first quarter. This robust growth exceeded analysts’ expectations, who had forecasted around $28.75 billion. NVDA’s Data Center Group (primarily connected to its AI operations) generated $26.30 billion in revenue, resulting in a 16% sequential gain and a triple-digit growth of 154% over the same period last year.

The company's bottom line remained buoyant, with operating income surging 174% from the year-ago value to $18.64 billion. NVDA’s non-GAAP net income amounted to $16.95 billion or $0.68 per share, compared to $6.74 billion or $0.27 per share in the previous year’s quarter, respectively. The chipmaker is now gearing up for new AI hardware releases based on the Blackwell architecture, which could boost demand in the coming years.

Moreover, it forecasted a revenue of $32.50 billion, plus or minus 2%, for its fiscal third quarter, representing an 81.6% growth from the year-ago quarter. However, this slightly falls short of the analysts’ estimates of $32.91 billion.

Is NVDA’s Buyback a Boost for Earnings or a Sign of Investor Fatigue?

In addition to its strong financials, NVIDIA's board has approved a massive $50 billion share buyback program. This adds to the $7.5 billion remaining from its previous buyback plan. Share repurchases typically boost earnings per share by reducing the number of outstanding shares, making the stock more attractive to investors.

The company has already returned $15.4 billion to shareholders through repurchases and dividends during the first half of fiscal 2025. However, despite the strong financial performance and the buyback announcement, NVDA’s stock dropped around 10% after its earnings report. It seems investors had such high expectations that even strong results weren’t enough to impress them.

“Investors want more, more and more when it comes to Nvidia,” said Dan Coatsworth, investment analyst at AJ Bell. “It looks like investors might not have taken the average of analyst forecasts to be the benchmark for Nvidia's performance, instead, they've taken the highest end of the estimate range to be the hurdle to clear.”

On the brighter side, the company’s upcoming AI-focused chips, particularly the Blackwell architecture, are poised to meet rising demand and could reignite investor confidence. While its production has been slightly delayed, the company plans to ramp up shipments in the fourth quarter, with strong demand already building up.

Alongside Blackwell, Nvidia’s Hopper platform continues to see robust demand, and shipments of its upgraded H200 platform are targeting cloud service providers and large enterprises, with more demand expected in the second half of 2024. Thus, Nvidia still has plenty of fuel left to drive another rally.

Bottom Line

Thanks to the surging demand for its AI platforms, upcoming product launches, and a broadening market, we believe that Nvidia is well-positioned for continued expansion. The recent dip in its share price could simply be a brief pause before the next phase of growth unfolds.

Moreover, analysts remain bullish on the chipmaker’s long-term prospects. Out of 42 analysts that rated NVDA, 39 rated it Buy, while three rated it Hold. The 12-month median price target of $152.44 indicates a 22.9% upside potential from the last closing price. The price targets range from a low of $90 to a high of $200.

Therefore, investors looking for long-term opportunities could consider scooping up the shares of this tech giant before the stock regains momentum.

Pfizer’s Dividend Yield vs. Growth: Is It Time to Rebalance Your Portfolio?

Posted on by The INO.com Team

Pfizer Inc. (PFE), striving to set the standard for quality, safety, and value in the discovery, development, and manufacture of biopharmaceutical products, reported solid second-quarter 2024 earnings and raised guidance for the full year. In the second quarter of 2024, the company’s revenues increased 2.1% year-over-year to $13.28 billion. This was PFE’s first quarter of top-line growth after reporting declines over the past five quarters.

Despite a modest year-over-year growth, Pfizer’s overall revenue growth has been sluggish, particularly in the post-pandemic period, as the pharma company lost the revenue boost from its COVID-19 vaccine. During the first six months of 2024, PFE’s revenues came in at $28.16 billion, down 11% year-over-year.

Furthermore, the company reported adjusted income and EPS of $3.40 billion and $0.60 for the second quarter, down 11.4% and 10.4% from the previous year’s quarter. While Pfizer’s adjusted EPS declined year-over-year, it surpassed analysts’ expectations of $0.46.

Dr. Albert Bourla, Chairman and CEO of Pfizer, said, “We are driving progress toward our 2024 strategic priorities through solid execution across the company. I am pleased with the strong performance of our product portfolio in the second quarter led by several of our acquired products, key in-line brands and recent commercial launches. Notably, we achieved exceptional growth in our Oncology portfolio, with strong revenue contribution from our legacy-Seagen products.”

“Overall, I am encouraged by our performance in the first half of 2024 and we remain focused on making a difference in the lives of patients as we continue to advance and strengthen our company,” Bourla added.

Following an improved second-quarter performance that exceeded past expectations, PFE raised its full-year guidance. The company increased its revenue guidance by $1 billion at the midpoint to a range of $59.5 to $62.5 billion. Its adjusted EPS is expected to be $2.45 to $2.65, up from the prior guidance of $2.15 to $2.35.

Pfizer’s Strength: A High Dividend Yield

Pfizer has raised dividends for 13 consecutive years. PFE pays an annual dividend of $0.42, which translates to a yield of 5.8%. The dividend yield of 5.80% is well above the average yield in the pharmaceutical sector. The company has demonstrated a long-standing commitment to returning capital to shareholders, having paid nearly $5 billion in dividends in the most recent quarter alone.

However, PFE’s dividend yield, while appealing, may not fully compensate for the company’s slower revenue growth trajectory. Since the pharmaceutical giant grapples with falling COVID-19 vaccine sales and patent cliffs on blockbuster drugs, future revenue growth may remain muted. This leaves Pfizer in a position where its high dividend yield could mask underlying financial challenges.

While Pfizer offers an attractive dividend yield, growth investors may find more attractive opportunities in faster-growing pharmaceutical companies like AbbVie Inc. (ABBV) and Eli Lilly and Company (LLY).

AbbVie: A Balance of Growth and Income

ABBV presents a compelling case for investors seeking both income and growth. The company boasts a strong product pipeline, particularly in immunology, oncology, neuroscience, and eye care, which positions it for sustained revenue growth. Moreover, AbbVie recently showcased the advancement of the solid tumor pipeline at ESMO 2024 with new data from its innovative antibody-drug conjugate (ADC) platform.

Further, in August 2024, the company completed the acquisition of Cerevel Therapeutics (CERE). This strategic acquisition strengthens its foundation in neuroscience and positions it to deliver sustainable long-term performance into the next decade and beyond.

For the second quarter that ended June 30, 2024, ABBV’s worldwide net revenues increased 4.3% year-over-year to $14.46 billion. Global net revenues from the oncology portfolio rose 10.5% year-over-year, and global net revenues from the neuroscience portfolio grew 14.7%.

“Our business continues to perform exceptionally well, with second quarter results meaningfully ahead of our expectations,” stated Robert A. Michael, chief executive officer of AbbVie. “Based upon the significant momentum of our ex-Humira growth platform, our continued investments in the business and our pipeline progress, we are very well positioned to deliver our top-tier long-term outlook.”

Following an outstanding second-quarter performance, AbbVie raised the 2024 adjusted EPS guidance range from $10.61-$10.81 to $10.71-$10.91.

In addition to these growth opportunities, AbbVie remains committed to rewarding shareholders. The company has a solid dividend track record, raising dividends for ten consecutive years. The company raised an annual dividend of $6.20, translating to a yield of 3.23% at the prevailing share price, making it an appealing option for investors who want a combination of dividend income and growth potential. Its balance of innovation and shareholder returns makes it an attractive long-term investment.

Should You Rebalance Your Portfolio?

For investors focused on maximizing long-term returns, it may be the right time to rebalance their portfolios. PFE’s high dividend yield remains attractive, but those seeking higher growth should consider trimming their positions and reallocating toward faster-growing pharmaceutical companies like ABBV or LLY.

Fed Rate Cuts Fuel Gold’s Rise: How to Play the Rally

Posted on by The INO.com Team

The recent Federal Reserve rate cut of 50 basis points has sparked a surge in gold prices. Gold, which reached a record high of $2,635.29 per ounce on Monday, has risen nearly 29% year-to-date. This surge has significantly boosted the appeal of gold as an attractive asset for investors.

Investors often turn to gold during uncertain times, as it is a safe-haven asset. The inverted yield curve, where short-term bond yields are higher than long-term yields, has added to recession fears, pushing more investors toward gold. In volatile markets, gold offers a way to diversify portfolios, protect against inflation, and hedge against broader market risks.

To play this rally, investors can look at gold ETFs such as SPDR Gold Shares (GLD) and VanEck Gold Miners ETF (GDX), which provide exposure to gold prices and gold mining companies, respectively. Additionally, stocks like Newmont Corporation (NEM) and Franco-Nevada Corporation (FNV) are well-positioned to benefit from gold’s continued rise, making them solid options for those looking to tap into the ongoing gold rush.

ETFs to Buy:

SPDR Gold Shares (GLD)

GLD is a popular exchange-traded fund (ETF) that aims to reflect the performance of the gold bullion price before fees and expenses, offering investors a way to track the value of gold without physically holding it. Managed by World Gold Trust Services, LLC, GLD invests primarily in gold, making it a convenient and efficient vehicle for those seeking exposure to the commodity market. It can be used as a short-term position to hedge against equity market volatility and inflation.

As of September 24, 2024, the fund had assets under management (AUM) of $74.32 billion and an NAV of $243.58. GLD has an expense ratio of 0.40%, which is lower than the category average of 0.48%. Its fund inflows came in at $4 billion over the past three months and $759.19 million over the past year. Also, the ETF has a beta of 0.11, indicating comparative stability than the broader market.

In terms of price performance, the ETF has surged nearly 38% over the past year and more than 28% year-to-date.

VanEck Gold Miners ETF (GDX)

GDX seeks to replicate the performance of the NYSE Arca Gold Miners index before fees and expenses. The non-diversified fund usually invests 80% of its total assets in depositary receipts and common stocks of the gold mining industry, thereby delivering an ‘indirect’ exposure to gold prices.

With $15.95 billion of total net assets, GDX’s top holdings include Newmont Corporation (NEM) with a 15.25% weighting, followed by Agnico Eagle Mines Limited (AEM) at 10.05%, and Barrick Gold Corporation (GOLD) and Wheaton Precious Metals Corp. (WPM), at 8.69% and 6.89%, respectively. It currently has 59 holdings in total.

The fund pays an annual dividend of $0.50, translating to a 1.21% yield at the prevailing price level. Its dividend payouts have grown at an impressive CAGR of 38.1% over the past three years and 36.6% CAGR over the past five years. Also, the fund’s four-year average yield is 1.32%.

Over the past five days, GDX’s fund inflows were $104.35 million and $438.16 million over the past month. In addition, its 0.51% expense ratio compares to the 0.48% category average. The ETF’s NAV was $41.24 as of September 24, 2024. Moreover, it has gained more than 43% over the past year and nearly 34% year-to-date. Also, it has a beta of 0.99.

Stocks to Buy:

Newmont Corporation (NEM)

Newmont is the world’s leading gold mining company and a producer of other precious and industrial metals, including copper, silver, zinc, and lead. NEM has the largest gold reserve base in the metals mining industry, underpinned by its world-class ore bodies in top-tier locations.

NEM’s sales increased 64.1% year-over-year to $4.40 billion for the fiscal second quarter that ended June 30, 2024. Its net cash from operating activities rose 112.5% from the prior-year quarter to $1.39 billion. NEM’s adjusted net income came in at $834 million and $0.72 per share, representing 213.5% and 118.2% year-over-year improvements. Also, its adjusted EBITDA stood at $1.97 billion, up 116% year-over-year.

During the quarter, NEM produced 1.61 million attributable ounces of gold and 477 thousand gold equivalent ounces (GEOs) from copper, silver, lead, and zinc. This growth was largely driven by the production of 1.31 million gold ounces from Newmont’s Tier 1 Portfolio.

Analysts expect NEM’s revenue for the third quarter (ending September 2024) to increase 86.2% year-over-year to $4.64 billion, while its EPS is expected to improve 121.9% from the year-ago value to $0.80 in the same period. In addition, it topped the EPS and revenue estimates in three of the trailing four quarters, which is impressive.

NEM’s stock is already up more than 65% over the past six months and has returned nearly 35% year-to-date.

Franco-Nevada Corporation (FNV)

Headquartered in Toronto, Canada, Franco-Nevada operates as a gold-focused royalty and streaming company with a presence in South America, Central America, Mexico, the United States, Canada, and internationally. Operating through the Mining and Energy segments, it manages its portfolio primarily focusing on precious metals, including gold, silver, and platinum group metals.  

On August 13, the company declared a quarterly dividend of $0.36 per share payable to its shareholders on September 26, 2024. With a four-year average dividend yield of 0.93% and the current dividend of $1.44 translating to a 1.12% yield, the company continues to provide consistent returns to its investors. Also, it has a payout ratio of 42.2%.

During the fiscal second quarter, which ended June 30, 2024, FNV reported total revenues of $260.10 million and a gross profit of $178.10 million. The company achieved an adjusted EBITDA of $221.90 million, with a margin of 85.3%, compared to an adjusted EBITDA margin of 83.5% in the prior-year quarter. FNV’s adjusted net income came in at $144.90 million and $0.75 per share in the same period. Also, its cash and cash equivalents at the end of the period stood at $1.44 billion, up 11.1% year-over-year.

Street expects FNV’s revenue and EPS to reach $1.13 billion and $3.32, respectively, in the current year ending December 31, 2024. For the fiscal year 2025, its revenue is forecasted to register a year-over-year growth of 13.7%, reaching $1.29 billion. Also, its EPS is expected to come in at $3.87, up 16.3% from the prior year.

The company’s strong growth outlook is driven by mine expansions and new mine starts, with expectations of up to nine new mines contributing from 2024 to 2028. FNV also holds significant long-term optionality in gold, copper, and nickel, with exposure to approximately 66,800 square kilometers of mineral-rich territory.

Moreover, FNV’s shares have gained more than 8% over the past three months and nearly 16% year-to-date.

Bottom Line

The yellow metal’s long-term prospects appear bright as the gold market is expected to rise to 6.32 kilotons by 2029, reflecting a CAGR of 7.4%. Thus, one can capitalize on the surge without holding it physically through gold stocks (such as NEM and FNV) or convenient gold ETFs like GLD and GDX.