Why Nvidia’s Stock Split Could Drive Further Market Gains

Posted on by The INO.com Team

NVIDIA Corporation (NVDA) shares topped a record high of $1000 in a post-earnings rally. Last week, the company reported fiscal 2025 first-quarter results that beat analyst expectations for revenue and earnings, reinforcing investor confidence in the AI-driven boom in chip demand. Moreover, the stock has surged nearly 120% over the past six months and more than 245% over the past year.

Meanwhile, the chipmaker announced a 10-for-1 forward stock split of NVIDIA’s issued common stock, making stock ownership more accessible to employees and investors.

Let's delve deeper into how NVIDIA’s stock split decision could attract more investors and propel future gains.

The AI Chip Leader

NVDA’s prowess in AI and semiconductor technology has been nothing short of remarkable. Its GPUs (Graphics Processing Units) have become synonymous with cutting-edge AI applications, from powering self-driving cars and training and deploying LLMs to revolutionizing healthcare diagnostics and e-commerce recommendation systems.

Amid a rapidly evolving technological landscape, NVIDIA has consistently remained at the forefront, driving innovation and redefining industry standards. Led by Nvidia, the U.S. dominates the generative AI tech market. ChatGPT’s launch in November 2022 played a pivotal role in catalyzing the “AI boom.”

NVDA holds a market share of about 92% in the data center GPU market for generative AI applications. The company’s chips are sought after by several tech giants for their diverse applications and high performance, including Amazon (AMZN), Meta Platforms, Inc. (META), Microsoft Corporation (MSFT), Alphabet Inc. (GOOGL), and Tesla, Inc. (TSLA).

Nvidia surpassed analyst estimates for revenue and earnings in the first quarter of fiscal 2025, driven by robust demand for its AI chips. In the first quarter that ended April 28, 2024, NVIDIA’s revenue rose 262% year-over-year to $26.04 billion. That topped analysts’ revenue expectations of $24.59 billion. The company reported a record revenue from its Data Center segment of $22.60 billion, up 427% from the prior year’s quarter.

“Our data center growth was fueled by strong and accelerating demand for generative AI training and inference on the Hopper platform. Beyond cloud service providers, generative AI has expanded to consumer internet companies, and enterprise, sovereign AI, automotive and healthcare customers, creating multiple multibillion-dollar vertical markets,” said Jensen Huang, founder and CEO of NVDA.

“We are poised for our next wave of growth. The Blackwell platform is in full production and forms the foundation for trillion-parameter-scale generative AI,” Huang added. 

NVDA’s non-GAAP gross profit grew 328.2% from the year-ago value to $20.56 billion. The company’s non-GAAP operating income was $18.06 billion, an increase of 491.7% from the prior year’s quarter. Its non-GAAP net income rose 461.7% year-over-year to $15.24 billion.

Furthermore, the chipmaker reported non-GAAP EPS of $6.12, compared to the consensus estimate of $5.58, and up 461.5% year-over-year.

Nvidia’s Stock Split: A Strategic Move

Alongside an outstanding fiscal 2025 first-quarter earnings, NVDA announced a 10-for-1 stock split of its issued common stock. Nvidia’s decision to split its stock aligns with a broader trend among tech giants to make their shares more appealing to a wider range of investors, particularly retail investors. The chipmaker aims to democratize ownership and attract a vast investor base by breaking down the barrier of high share prices.

As more individual investors gain access to Nvidia’s shares post-stock split, we could see heightened trading activity and increased demand, potentially exerting upward pressure on its share prices. This strategic move reflects the confidence of NVIDIA’s management in its future growth trajectory and underscores its commitment to inclusivity in the investment landscape.

Bank of America analysts, led by Jared Woodward, head of the bank’s research investment committee, described the share split as “another large-cap tech pursuing shareholder-friendly policies” in a note to clients.

NVIDIA marks the fourth Magnificent Seven big tech companies to announce a stock split since 2022, following Google, Amazon, and Tesla’s efforts to make shares more accessible, according to Woodward and his team.

In recent years, as the share prices of several Big Tech companies surged past the $500 mark, it has become challenging for retail investors to buy shares. Consequently, these companies have been exploring ways to simplify the process for nonprofessional investors to buy in. BofA added, “Big Tech is going bite-sized” to lure retail investors, which might signal more market-beating returns.

Historical Data Suggests That Stock Splits Indicate a Bullish Outlook

Examining historical data on stock splits reveals a generally positive picture. While immediate post-split gains aren’t guaranteed, companies like Apple Inc. (AAPL) and Google have witnessed substantial appreciation in their share prices following splits. AAPL’s 4-for-1 stock split, which took effect in August 2020, primarily influenced investor sentiment and trading dynamics.

Following the split, Apple’s stock continued its upward trajectory, driven by solid performance in its core businesses, including iPhone sales, services revenue, and wearables. Throughout the latter half of 2020 and into 2021, its share price experienced significant appreciation, reaching new all-time highs.

Given NVIDIA’s robust fundamentals and leadership in AI and semiconductor technology, there’s reason to believe that its recent stock split could lead to similar outcomes.

BofA’s sell-side analysts have consistently been bullish on Nvidia shares, and following the first-quarter earnings release, they raised their lofty 12-month price target for the chip giant from $1,100 to $1,320. If the outlook proves accurate, Nvidia shares could surge by another 26%, and the stock split could support that bullish move, as per Bank of America’s reading of history.

“Splits have boosted returns in every decade, including the early 2000s when the S&P 500 struggled,” noted Woodard and his team. BofA’s research indicates that stocks have delivered 25% total returns within the 12 months following a stock split historically, compared to the S&P 500’s 12%.

Further, the bank highlighted that stock splits often ignite bullish runs, even in stocks that have been underperforming. For example, both Advanced Micro Devices, Inc. (AMD) and Valero Energy Corporation (VLO) experienced significant share price increases after announcing stock splits despite their prior poor performance. According to analysts, “Since gains are more common and larger than losses on average, splits appear to introduce upside potential into markets.”

However, it's essential to heed the standard caveat the Securities and Exchange Commission (SEC) provided: “Past performance is not indicative of future results.” In line, Bank of America emphasized that “outperformance is no guarantee” after a stock split. Companies still witness negative returns 30% of the time following a split, with an average decline of 22% over the subsequent 12 months.

The analysts noted, “While splits could be an indication of strong momentum, companies can struggle in a challenging macro environment.” They pointed to companies like Amazon, Google, and Tesla that faced difficulties in the 12 months following their stock splits in 2022 due to a high interest-rate environment.

Bottom Line

NVDA has a significant role as a global leader in AI and semiconductor technology, with its GPUs driving innovations across numerous industries, such as tech, automobile, healthcare, and e-commerce. Nvidia’s fiscal 2025 first-quarter results suggest that demand for its AI chips remains robust.

Statista projects the global generative AI market to reach $36.06 billion in 2024. This year, the U.S. is expected to maintain its position as the leader in AI market share, with a total of $11.66 billion. Further, the market is estimated to grow at a CAGR of 46.5%, resulting in a market volume of $356.10 billion by 2030. The AI market’s bright outlook should bode well for NVDA.

The company also recently made headlines with its announcement to undergo a 10-for-1 stock split. While stock splits generally do not change the fundamental value of a company, they make its shares more accessible and attractive to retail investors. So, the recent stock split could significantly increase retail participation, driving heightened trading activity and potentially exerting upward pressure on Nvidia’s share prices.

Historically, stock splits generally indicate a positive impact on stock performance. Companies like AAPL, GOOGL, and AMD experienced substantial price appreciation after stock splits, with enhanced accessibility to retail investors driving higher demand and liquidity.

However, it is crucial to acknowledge that past performance is not indicative of future results. While stock splits can signal strong price momentum, they do not guarantee outperformance.

In conclusion, Nvidia’s stock split will likely attract more retail investors, potentially boosting increased trading activity and stock price appreciation. Coupled with the company’s strong position in the AI and semiconductor markets, the stock split could facilitate further growth, aligning with historical trends of positive post-split performance.

10 Reasons Why Duolingo (DUOL) Is a Top Growth Stock to Buy in 2024

Posted on by The INO.com Team

Duolingo, Inc. (DUOL), a standout in the consumer discretionary sector, leads the digital language learning market with its innovative and engaging approach. With its iconic green owl mascot, Duolingo has gamified language learning, turning vocabulary and grammar lessons into an addictive game-like experience. Leveraging a freemium model, the company offers lessons in over 40 languages and has seen rapid growth in both user base and paid subscriptions.

Duolingo’s secret sauce? A blend of cutting-edge technology and gamification. By applying AI to personalize the learning experience, Duolingo keeps its 97.6 million monthly active users hooked. Their lessons are accessible anytime, anywhere via smartphones, transforming idle moments into productive learning opportunities. This approach has not only pulled education out of the classroom but also placed it right at our fingertips.

Expanding User Base

DUOL’s strong user engagement is evident by its impressive growth in daily active users, which reached 31.4 million in the first quarter, a significant increase from 20.3 million the previous year. Moreover, the number of paid subscribers has soared by 54% year-over-year, totaling 7.4 million (with the proportion of paying users increasing from 8% to 8.6%). Clearly, learners are more than willing to pay for the premium experience.

Duolingo’s Innovations in Learning, Now With AI

Beyond language learning, Duolingo is expanding into new educational territories, including Mathematics and Music, using the same gamified, engaging format. Last year, Duolingo launched a multi-subject app experience, integrating a new Music course and an updated Math course into its flagship app. This allows learners on iOS to seamlessly switch between learning a language, honing their math skills, or diving into the world of music. This expansion not only adds value but also attracts a wider audience, increasing daily practice and user retention.

But it doesn’t stop there. Building on its commitment to innovation, Duolingo has recently introduced AI-driven features to enhance the learning experience. With the launch of its premium subscription tier, Duolingo Max, users gain access to two powerful AI tools designed to accelerate language proficiency.

One of them is Roleplay, an AI chatbot that facilitates conversational practice in the user’s chosen language by providing real-time feedback and guidance. Meanwhile, the other Explain My Answer offers personalized feedback on mistakes made in each lesson, enhancing comprehension and retention.

As the company continues to evolve its platform, we can expect more AI-based learning tools to enhance the user experience further and drive subscription growth. Further, these innovations mark just the beginning of Duolingo’s long-term growth potential.

Financial Performance

In the first quarter that ended March 31, 2024, DUOL’s net revenues increased 44.8% year-over-year to $167.55 million, with a 53% growth in its subscription revenue of $131.69 million. Its gross profit grew 45.4% from the year-ago value to $122.36 million.

The company’s operational performance also witnessed a significant turnaround, with income from operations amounting to $16.44 million compared to a loss of $8.52 million in the previous year. In the March quarter, DUOL achieved its highest quarterly adjusted EBITDA, which increased by $28.90 million year-over-year to $44.01 million.

Moreover, its net income was $26.96 million or $0.57 per share, compared to a net loss of $2.58 million or $0.06 per share in the previous year. The uptick in margins and profits signifies that Duolingo is capitalizing on economies of scale, attracting millions of new users and successfully converting them into paying subscribers.

As of March 31, 2024, its cash, cash equivalents, and restricted cash amounted to $832.45 million, reflecting a 29.8% increase from the prior-year period. Also, its free cash flow improved by 176.5% from the prior-year quarter to $79.62 million.

Furthermore, the company comprehensively surpassed Wall Street’s EPS and revenue estimates. For the first quarter, DUOL’s earnings per share was 119.2% above the consensus estimate, and its revenue was higher than the analysts’ estimates by $1.90 million.

Optimistic Outlook and Analysts Forecasts 

Duolingo is optimistic about its revenue and earnings growth in 2024, driven by strong user engagement and the rollout of new monetization strategies. Second-quarter revenues are projected between $175 million to $177.5 million, with adjusted EBITDA to be in the range of $36.8 million to $39.1 million.

For the full year, the company foresees revenues in the range of $726.5 million to $735.5 million, with adjusted EBITDA estimated between $167.1 million to $176.5 million. Additionally, total bookings are anticipated to reach highs of $181.5 million in the June quarter and $817.5 million for the year.

The consensus revenue estimate of $177.02 million for the fiscal second quarter (ending June 2024) represents a 39.6% increase year-over-year. The consensus EPS estimate of $0.28 for the current quarter indicates a 252.8% improvement year-over-year. The company has an excellent surprise history, surpassing the consensus revenue estimates in each of the trailing four quarters.

Looking ahead, analysts forecast a 38% and 344.2% year-over-year increase in DUOL’s revenue and EPS for the current year (ending December 2024), projecting figures of $732.95 million and $1.55, respectively. For the fiscal year 2025, revenue and EPS are forecasted to grow by 27.4% and 52.7% year-over-year, respectively.

Impressive Historical Growth

Duolingo stands out as a leading growth stock with a focus on innovation, efficient marketing strategies, and strong unit economics. Over the past three years, DUOL’s revenue has grown at a CAGR of 45.6%. In addition, the company’s total assets have grown at a CAGR of 82.1% over the same period, and its levered free cash flow has improved at a 79.9% CAGR.

Why Did Duolingo Plunge Post-Earnings? 

Despite an impressive performance in its recent earnings report, the company witnessed the steepest single-day decline, falling nearly 20%. Investors seemed spooked by a slight slowdown in the growth of daily active users, slipping from a robust 65% year-over-year surge in the previous quarter to a 54% uptick in the first quarter of 2024. Similarly, paid subscription growth softened from 57% to 54%.

Duolingo’s lofty valuation adds to the pressure, as its forward Price/Sales ratio stands at 10.50x, significantly above the industry average of 0.87x. Similarly, its forward EV/Sales ratio of 9.44x exceeds the industry norm by 671.8%, and its forward non-GAAP P/E ratio of 46.69x is 193.3% higher than the industry average of 15.92x.

Nonetheless, shares of DUOL have gained nearly 36% over the past nine months and more than 20% over the past year.

Bottom Line

Duolingo’s impressive user growth, revenue, and earnings underscore its dominance in the global learning market. As the market for digital language learning is poised to surpass $101.94 billion in 2032, the company’s revenue forecast for the year barely taps into its full potential. That means Duolingo has more room for growth. Moreover, with the anticipation of interest rates stabilizing or decreasing in the near future, Duolingo could become an attractive investment for growth-oriented investors again.

With a track record of innovation, efficient marketing, and strong profitability, Duolingo is well-positioned to seize opportunities in 2024 and beyond. Therefore, considering its strong fundamentals and growth prospects, investing in DUOL could be wise now.

The Risks and Rewards of Investing in SoundHound AI

Posted on by The INO.com Team

With a $1.68 billion market cap, SoundHound AI, Inc. (SOUN) is one of the most prominent names in AI-powered voice applications, drawing significant attention from investors and analysts. Shares of SOUN have surged more than 134% over the past six months and nearly 138% year-to-date.

SOUN is at the forefront of conversational intelligence, offering voice AI solutions that allow businesses to provide incredible conversational experiences to their customers. Built on proprietary technology, it offers top-tier speed and accuracy in multiple languages to product creators across automotive, IoT devices, restaurant, and customer service industries.

SoundHound’s innovative AI-driven products include Smart Answering, Smart Ordering, and Dynamic Interaction™, a cutting-edge real-time, multimodal customer service interface.

According to research compiled by Mordor Intelligence, the voice recognition market is expected to reach $42.08 billion by 2029, growing at a CAGR of 23% during the forecast period (2024-2029).

In the dynamic field of voice recognition technology, SoundHound encounters competition from various players striving to innovate and capture market share. Rivals range from established giants like Alphabet Inc. (GOOGL) and Amazon.com, Inc. (AMZN) to emerging start-ups specializing in AI-driven solutions, including Krisp, Deepgram, and more.

Let’s discuss SoundHound’s fundamentals and growth prospects in detail.

Accelerates Voice AI Innovation with Strategic Partnerships and Acquisitions

On May 9, SOUN partnered with Perplexity, the conversational AI-powered answer engine. The collaboration will integrate Perplexity’s online large language model (LLM) capabilities into SoundHound Chat AI across cars and IoT devices.

Leveraging Perplexity, the SoundHound Chat AI assistant will offer precise and up-to-date responses to web-based queries, addressing the type and complexity of the questions beyond the reach of static LLMs. This strategic move aims to solidify SoundHound’s AI product as the most advanced voice assistant available in today’s market.

Further, SoundHound unveiled a significant milestone on March 25. The company announced that its voice assistant with integrated ChatGPT debuted in vehicles in Japan. SoundHound Chat AI Automotive became the world’s first in-vehicle voice assistant with integrated generative AI upon its launch in April 2023. Starting in March, it became accessible in Stellantis DS Automobiles across Japan.

Also, on March 18, SOUN introduced an in-vehicle voice assistant that uses LLM on the edge through the NVIDIA DRIVE platform. SoundHound’s collaboration with NVIDIA Corporation (NVDA) expands the reach of generative AI to new places and situations, ensuring optimal performance even without cloud connectivity.

Notably, during the March quarter, the company closed the previously announced acquisition of SYNQ3 Restaurant Solutions, a leading provider of voice AI and other tech solutions for the restaurant sector. This deal will extend SOUN’s market reach by an order of magnitude to more than 10,000 signed locations and accelerate the deployment of leading-edge generative AI capabilities to the industry.

SYNQ3 will expand SoundHound’s customer base significantly, with the addition of prominent brands across the drive-thru, fast casual, casual dining, and convenience store segments – bringing the total to over 25 national and multinational chains.

Mixed First-Quarter Results and Upbeat 2024 Outlook

For the first quarter that ended March 31, 2024, SOUN’s revenues increased 73% year-over-year to $11.59 million. That surpassed analyst expectations of $10.10 million. The company’s non-GAAP profit rose 56.8% from the prior year’s quarter to $7.59 million.

Moreover, SoundHound’s cumulative subscriptions and bookings backlog was $682 million, up nearly 80% year-over-year. Also, it reported a 60% year-over-year increase in the annual run rate of more than 4 billion queries. SOUN had a cash balance of $226 million at the end of the first quarter.

“We were pleased to start the year with a robust top line performance, in our strongest Q1 ever,” stated Nitesh Sharan, CFO of SoundHound AI. ”Our business momentum continues to accelerate with a growing pipeline across all businesses.”

However, the company’s bottom line suffered significantly. SOUN’s adjusted EBITDA loss widened by 3.3% year-over-year to $15.40 million. Further, its net loss worsened by 20% from the year-ago value to $33.01 million. It posted a loss per share of $0.12, missing the consensus loss per share estimate of $0.09.

During the quarter, SOUN’s cash outflows from operating activities and investing activities were $21.95 million and $3.79 million, respectively.

Meanwhile, SOUN updated its full-year 2024 revenue guidance to be in a range of $65 to $77 million. Further, the company aims to achieve adjusted EBITDA profitability by 2025, anticipating even greater growth, with revenue exceeding $100 million.

Decelerating Profitability

SOUN’s trailing-12-month gross profit margin of 72.42% is 45.9% higher than the 49.6% industry average. However, the stock’s trailing-12-month EBIT margin and net income margin of negative 131.21% and negative 186.20% are unfavorable compared to the industry averages of 4.68% and 2.63%, respectively.

Additionally, the stock’s trailing-12-month levered FCF margin of negative 58.19% compared to the industry average of 10.12%. Its trailing-12-month ROCE, ROTC, and ROTA of negative 148.22%, negative 28.94%, and negative 32.88% compared to the respective industry averages of 3.91%, 2.57%, and 1.42%.

Elevated Valuation

In terms of forward EV/Sales, SOUN is trading at 21.93x, 657.9% higher than the industry average of 2.89x. Similarly, the stock’s forward Price/Sales of 23.62x is significantly higher than the industry average of 2.96x. Also, its trailing-12-month Price/Book multiple of 10.61 is 234.4% higher than the industry average of 3.17.

Bottom Line

SOUN’s position as a global leader in AI-powered voice applications and its strategic initiatives set it for continued growth in a rapidly expanding market. The company’s innovative AI-powered products, strategic partnerships with Perplexity and NVIDIA, and the recent acquisition of SYNQ3 accelerate market expansion across automotive and restaurant sectors, offering opportunities for revenue diversification.

Despite impressive revenue growth in the first quarter of 2024, SoundHound faces profitability challenges, as reflected in widening losses and negative margins. Continued losses and cash burn could strain financial resources and investor confidence.

Analysts expect SOUN’s revenue for 2024 and 2025 to increase 53.7% and 46.6% year-over-year to $70.52 million and $103.35 million, respectively. However, the company is expected to report losses for at least two fiscal years. Moreover, SoundHound failed to surpass consensus EPS estimates in three of the trailing four quarters, which is disappointing.

SoundHound’s valuation metrics, such as its forward EV/Sales and Price/Sales ratios, indicate a premium compared to industry peers. An elevated valuation can often lead to enhanced volatility and susceptibility to market corrections, particularly if the company fails to meet growth expectations or faces challenges in achieving profitability.

Thus, investing in SOUN presents a blend of potential risks and rewards for investors to consider. While the company demonstrates strength in revenue growth and market leadership within the voice recognition sector, notable challenges warrant attention, including massive losses, rapid cash burn, and stretched valuation.

So, investors are advised to monitor SOUN’s financial performance, execution of growth plans, and market dynamics before making informed investment decisions.

Gold Hits Record Highs: Is It Time to Buy Gold Mining Stocks?

Posted on by The INO.com Team

Gold prices soared to an all-time high on Monday, driven by a combination of factors, including expectations of U.S. rate cuts, China's stimulus measures, and geopolitical tensions, which boosted demand. Spot gold rose by 0.9% to $2,435.96 per ounce after hitting a record $2,449.89 earlier. U.S. gold futures also closed 0.9% higher at $2,438.50.

Recent data showing lower-than-expected U.S. consumer price increases in April has boosted hopes for a rate cut in September, further supporting gold prices. RJO Futures’ senior market strategist, Daniel Pavilonis, expects gold to approach $2,500 soon due to investor fear of missing out. Meanwhile, silver prices also surged, climbing 2.2% to $32.17, the highest in over 11 years.

These factors, coupled with gold's scarcity and intrinsic value, have made it an appealing investment in today's uncertain economic climate. With gold reaching a new record high, an increasing number of investors are seeking to capitalize on this potentially lucrative opportunity.

Let’s examine why Newmont Corp., Barrick Gold, Franco-Nevada, and Dundee Precious Metals (DPMLF) could be wise investments now.

Newmont Corporation (NEM)

Newmont Corporation (NEM) 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.

In line with its strategic financial initiatives, on April 25, 2024, Newmont announced the sale of its financing facilities related to the Fruta del Norte gold mine in Ecuador to Lundin Gold Inc. for $330 million. This transaction, set to be completed in two tranches by September 30, 2024, allows Newmont to retain exposure to the operation through its equity interest in Lundin Gold.

Moreover, as part of its acquisition of Newcrest and a broader strategy to generate lasting value, the company has committed to delivering at least $2 billion in near-term cash improvements through portfolio optimization within the next two years. The early repayment of these facilities marks a significant step towards achieving this goal, reinforcing Newmont's trajectory towards a more profitable and resilient future.

In terms of forward non-GAAP PEG, NEM is trading at 1.44x, 10% lower than the industry average of 1.60x. Likewise, its forward EV/EBITDA multiple of 7.58 is 13.1% lower than the industry average of 8.72.

NEM’s sales increased 50.2% year-over-year to $4.02 billion for the fiscal first quarter that ended March 31, 2024. Its net cash from operating activities rose 61.3% from the prior-year quarter to $776 million. NEM’s adjusted net income came in at $630 million and $0.55 per share, representing 96.9% and 37.5% year-over-year improvements. Also, its adjusted EBITDA stood at $1.69 billion, up 71.1% year-over-year.

During the quarter, NEM produced 1.7 million attributable ounces of gold and 489 thousand gold equivalent ounces (GEOs) from copper, silver, lead, and zinc. This growth was largely driven by the production of 1.4 million gold ounces from Newmont's Tier 1 Portfolio.

Analysts expect NEM’s revenue for the second quarter (ending June 2024) to increase 53.1% year-over-year to $4.11 billion, while its EPS is expected to improve 68.1% from the year-ago value to $0.55 in the same period.

The stock’s trailing-12-month gross profit and EBITDA margins of 32.44% and 28.31% are 14.9% and 72.2% higher than the 28.23% and 16.44% industry averages, respectively. Its trailing-12-month Capex/Sales of 22.73% compares with the industry average of 7.76%.

NEM’s stock is already up more than 37% over the past three months and has gained nearly 2.4% year-to-date. Bolstered by its strong portfolio of Tier 1 gold and copper operations, NEM is poised to maintain its gold production at approximately 6.9 million ounces. With projected costs of sales (CAS) for gold at $1,050 per ounce and an all-in-sustaining cost (AISC) of $1,400 per ounce, NEM is well positioned to capitalize on higher gold prices.

Barrick Gold Corporation (GOLD)

Barrick Gold Corporation (GOLD), based in Toronto, Canada, is engaged in the exploration, mine development, production, and sale of gold and copper properties. The company holds ownership interests in producing gold mines across various countries, including Argentina, Canada, Côte d'Ivoire, the Democratic Republic of Congo, the Dominican Republic, Mali, Tanzania, and the United States.

On May 1, 2024, Barrick Gold (International Holdings) Ltd., a subsidiary of GOLD, entered into an exploration earn-in agreement with Geophysx Jamaica Ltd. This agreement provides GOLD with access to approximately 4,000 square kilometers of consolidated land positions in Jamaica. The strategic partnership is expected to enhance GOLD's exploration capabilities and potentially lead to significant new discoveries, aligning well with the company’s ongoing operations and growth strategy.

In another strategic move, GOLD’s Nevada Gold Mines celebrated the official opening of its new underground mine, Goldrush, on April 25. The Goldrush Project is projected to produce 130,000 ounces of gold in its initial year, contributing to the overall value and production capacity of Nevada Gold Mines (NGM). Barrick holds a 61.5% ownership stake in this project through a joint venture with Newmont, which owns the remaining 38.5%.

Such strategic partnerships provide a stable foundation for sustained growth and capital investment, allowing the company to fully benefit from favorable market conditions in the gold sector.

In terms of forward non-GAAP P/E, GOLD is trading at 16.74x, 8.6% lower than the industry average of 18.31x. The stock’s forward EV/EBITDA of 6.70x is 23.2% lower than the 8.72x industry average. Furthermore, the stock’s forward Price/Cash Flow multiple of 6.70 is 27.6% lower than the industry average of 9.25x.

In the fiscal first quarter that ended March 31, 2024, GOLD’s revenues increased 3.9% year-over-year to $2.75 billion. Its adjusted EBITDA grew 7% from the year-ago value to $1.27 billion with an attributable margin of 41%. GOLD’s adjusted net earnings amounted to $333 million or $0.19 per share, reflecting an increase of 34.8% and 35.7%, respectively, in the same period.

Also, it produced 940 thousand gold ounces during the quarter, which was slightly below compared to 952 thousand in the prior year.

The consensus EPS estimate of $0.25 for the fiscal second quarter (ending June 2024) represents a 33.9% improvement year-over-year. The consensus revenue estimate of $3.22 billion for the ongoing quarter indicates a 13.6% increase from the same period last year. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.

In addition, GOLD’s trailing-12-month gross profit margin and ROCE of 31.15% and 6.27% are 10.4% and 7.4% higher than the industry averages of 28.23% and 5.83%, respectively. Likewise, its trailing-12-month 12.58% net income margin compares to the industry average of 4.72%.

Further, the company anticipates a steady increase in gold production throughout the year, fueled by the completion of the Pueblo Viejo plant expansion and the restart of operations at the Porgera mine. Copper production is also on course to meet the full year's guidance. These initiatives position Barrick to capitalize on high market prices with elevated output. In terms of price performance, the stock has surged more than 20% over the past three months.

Franco-Nevada Corporation (FNV)

Headquartered in Toronto, Canada, Franco-Nevada Corporation (FNV) 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 with a primary focus on precious metals, including gold, silver, and platinum group metals.

On May 1, the company declared a quarterly dividend of $0.36 per share payable to its shareholders on June 27, 2024. With a four-year average dividend yield of 0.89% and the current dividend of $1.44 translating to a 1.16% yield, the company continues to provide consistent returns to its investors. Also, it has a payout ratio of 39.20%.

During the fiscal first quarter, which ended March 31, 2024, FNV reported total revenues of $256.80 million and a gross profit of $165 million. The company achieved an adjusted EBITDA of $216.10 million, with a margin of 84.2%, compared to an adjusted EBITDA margin of 83% in the prior-year quarter. FNV’s adjusted net income came in at $146 million and $0.76 per share in the same period. Also, its cash and cash equivalents at the end of the period stood at $1.35 billion, up 8.3% year-over-year.

Looking ahead, analysts expect FNV’s revenue to reach $1.11 billion in the fiscal year ending December 2024, while its EPS is forecasted to be $3.20. Moreover, the company has topped the EPS estimates in all of the trailing four quarters, which is excellent.

For the fiscal year 2025, the consensus revenue and EPS estimates of $1.24 billion and $3.76 indicate increases of 12.3% and 17.5%, respectively.

In addition, the stock’s trailing-12-month gross profit and EBITDA margins of 85.59% and 83.64% are 203.2% and 408.9% higher than the industry averages of 28.23% and 16.44%, respectively. Likewise, its levered FCF margin of 50.04% compares with the industry average of 5.29%.

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.

Additionally, FNV's financial resilience, characterized by a lack of debt, $2.4 billion in available capital, and a robust pipeline of precious metal opportunities, positions it favorably to leverage high gold prices for sustained growth and profitability.

FNV’s shares have gained nearly 17.1% over the past three months and more than 12% year-to-date.

Dundee Precious Metals Inc. (DPMLF)

Dundee Precious Metals Inc. (DPMLF), headquartered in Toronto, Canada, acquires, explores, develops, mines, and processes precious metals. The company owns and operates a mine that produces gold, copper, and silver.

On May 7, the company announced a dividend of $0.04 per common share for the second quarter, payable to its shareholders on July 15, 2024. The company maintains a four-year average dividend yield of 1.99%, with the current annual dividend of $0.16 translating to the same yield. DPM has demonstrated consistent returns to investors, with dividend payouts growing at an impressive 16.9% CAGR over the past three years.

On March 7, Dundee Precious announced the sale of its 98% interest in the Tsumeb smelter to a subsidiary of Sinomine for $49 million in cash, subject to normal adjustments. DPMLF will also receive $17.9 million from IXM S.A. for estimated metal recoverables. The transaction, pending customary approvals, is expected to close in Q3 2024. This sale will enhance DPMLF's liquidity and focus on core operations.

DPMLF’s forward EV/ EBITDA and EV/EBIT multiples of 3.10 and 4.08 are 64.5% and 70.1% lower than the industry averages of 8.72x and 13.61x, respectively. Also, its forward EV/Sales ratio of 1.57 is 9.8% lower than the industry average of 1.75x.

DPMLF reported revenues of $123.80 million for the fiscal first quarter that ended March 31, 2024. Its earnings before income taxes rose 7% from the prior-year quarter to $52.60 million, while its adjusted EBITDA stood at $65.90 million. The company’s net earnings came in at $45.70 million, while its earnings per share remained flat year-over-year at $0.25. Also, its free cash flow increased 5% year-over-year to $68.20 million in the same period.

During the first three months of the year, DPMLF produced 62,727 ounces of gold and 6.7 million pounds of copper, which was in line with expectations, with all-in-sustaining costs of $883 per ounce. The company also repurchased 253,000 shares for a total cost of $1.9 million, besides paying $7.2 million in dividends.

Street expects DPMLF’s revenue for the second quarter (ending June 2024) to reach $141 million. Its revenue for the current year is expected to grow 6.8% from the year-ago value to $555.73 million.

The stock’s trailing-12-month gross profit margin of 52.74% is 86.8% higher than the industry average of 28.23%. Likewise, its net income and levered FCF margins of 37.12% and 19.07% compare to the industry averages of 4.72% and 5.29%, respectively.

With strong operating performance from the Chelopech and Ada Tepe mines in the first quarter of 2024, DPMLF is on track to meet its 2024 guidance. The company expects gold production of 245,000 to 285,000 ounces, copper production of 29 to 34 million pounds, and an all-in-sustaining cost of $790 to $930 per ounce of gold sold.

Further, the positive outcomes from the Čoka Rakita Preliminary Economic Assessment (PEA) have prompted DPMLF to commence a Pre-Feasibility Study (PFS) for the project. This development has led to an increase in the company's 2024 evaluation expense forecast, now estimated between $30 million and $35 million, up from the previous $10 million to $13 million range.

DPMLF’s stock is already up more than 29% over the past nine months and has gained approximately 25% year-to-date.

Visa’s AI Innovations and What They Mean for Investors

Posted on by The INO.com Team

With a global presence in over 200 countries and territories, Visa Inc. (V) is a formidable player in the Financial Services industry. Over the years, the company’s innovative payment solutions have enabled individuals to transact across various devices and payment methods anytime, anywhere.

From mobile payments to contactless transactions, Visa has consistently introduced new technologies that have transformed how we pay and do business. And now, with its latest suite of payment products and services, the credit card behemoth continues to demonstrate its capacity for innovation and growth in the digital payments arena.

Unveiling Visa’s New Products for the Digital Era

Earlier this month, at the annual Visa Payments Forum in San Francisco, the company introduced innovative products and services designed to meet the evolving needs of businesses, merchants, consumers, and financial institutions.

These offerings, set to roll out later this year, include the Visa Flexible Credential, which empowers consumers to switch between payment methods on a single card. Users have unparalleled flexibility, whether debit, credit, “pay-in-four” Buy Now Pay Later options, or rewards points. Currently living in Asia, Visa Flexible Credential is set to debut in the U.S. market later this summer in collaboration with Affirm.

The company is embracing the widespread adoption of mobile devices by introducing innovative “Tap to Everything” features, capitalizing on the versatility of NFC-enabled devices. These new features include ‘Tap to Pay,’ which transforms any device into a point-of-sale terminal; ‘Tap to Confirm’ for easy online shopping authentication; ‘Tap to Add Card’ for enhanced wallet security when adding cards to digital wallets or apps; and ‘Tap to P2P’ for seamless money transfers between family and friends.

V introduced the Visa Payment Passkey Service to combat the rising threat of online payment fraud, which takes security to the next level by replacing passwords with biometric authentication for online transactions. This feature seamlessly integrates with Click to Pay, providing a frictionless checkout experience while enhancing security. Moreover, the company is partnering with issuers worldwide to enable Click to Pay and Visa Payment Passkey Service on new Visa cards, reducing the need to enter card details and passwords manually.

In addition, the credit card provider is also digitizing and streamlining account-to-account (A2A) payments with “Pay by Bank,” offering consumers greater flexibility in how they choose to pay. Through collaborations with Global Real-Time Payments (RTP) networks, Visa is leveraging AI technology to detect and prevent fraud in A2A payments. Already making strides in Latin America and piloting the UK, Visa Protect for A2A Payments has identified 60% of previously undetected fraud and scams, ensuring a safer payment ecosystem for all.

Lastly, the company also introduced Data Tokens, a privacy-centric feature that enables consumers to control data sharing with merchants for personalized offers and revoke access through their banking apps.

Such strategic initiatives signal promising prospects for the ever-changing payments landscape, and Visa’s commitment to continuous improvement is poised to fortify its foothold.

Visa Remains at the Forefront of AI Innovation

Threat actors are increasingly employing sophisticated technologies like automated scripts and botnets to amplify card testing attacks, resulting in substantial operational costs and annual fraud losses of $1.1 billion. To counter this threat, Visa announced updates to its Visa Account Attack Intelligence (VAAI) offering on May 7, introducing the VAAI Score.

This new tool utilizes generative AI components to identify and score enumeration attacks, providing real-time risk scores for each transaction. Initially available to U.S. issuers, the VAAI Score aims to mitigate fraud and operational losses by detecting and preventing enumeration attacks in card-not-present (CNP) transactions.

On March 27, 2024, the company added three new AI-powered risk and fraud prevention solutions to its growing global value-added services business. These additions, forming part of the comprehensive Visa Protect suite, aim to combat fraud in immediate account-to-account and card-not-present (CNP) payments, enhancing security for transactions on and off Visa’s network.

Visa’s Strategic Expansion Initiatives: Boom or Bust?

Recently, Visa partnered with SKUx, a digital payment solutions provider, to enhance digital payment experiences for select merchants and consumer packaged goods companies. The collaboration aims to address client needs such as customer acquisition, loyalty programs, and consumer care.

Visa clients will gain access to SKUx’s digital payments platform, improving business-to-business and business-to-consumer payment flows. Further, this strategic move underscores V’s commitment to enhancing its services and attracting new customers, ultimately increasing revenue opportunities.

On March 26, Visa reached a landmark settlement with U.S. merchants, more than 90% of which are small businesses. The settlement reduces credit interchange rates and caps those rates into 2030. It also includes updates to several key network rules, giving merchants more choice in how they accept digital payments.

While the settlement is subject to court approval, this move aims to enhance the company’s relationships with merchants and improve the affordability of accepting Visa payments, potentially leading to increased transaction volume.

Also, in January this year, the company acquired Pismo, a global cloud-native issuer processing and core banking platform. This acquisition equips Visa to deliver enhanced core banking and card-issuer processing capabilities to clients across various product types through cloud-native APIs. By leveraging Pismo’s platform, V can extend support and connectivity for emerging payment schemes and real-time payment networks, strengthening its offerings for financial institution clients.

How Are Visa’s Fundamentals?

Despite persistent high interest rates, U.S. consumer spending has remained robust, thanks to Americans’ continued appetite for big-ticket purchases and international travel. In the second quarter that ended March 31, 2024, V’s net revenue increased 9.9% year-over-year to $8.78 billion, surpassing Wall Street’s forecast of $8.62 billion.

Consumer spending remained resilient across all segments during the quarter, driving an 8% year-over-year growth in Visa’s payments volume. Cross-border volume (excluding intra-Europe) surged by 16%, indicating strong demand for international travel. Its processed transactions rose 11% from the prior year to $55.50 billion.

Moreover, the company’s operating income grew marginally from the year-ago value to $5.35 billion. Its non-GAAP net income and non-GAAP earnings per share stood at $5.12 billion and $2.51, up 16.7% and 20.1% year-over-year, respectively.

As of March 31, 2024, Visa had $12.99 billion in cash and cash equivalents, a significant cash pile but comparatively lower than the $16.29 billion on December 31, 2023. Yet, the company was able to return $3.8 billion to shareholders in the second quarter through dividends and share repurchases.

On April 23, 2024, Visa announced a quarterly dividend of $0.52 per share of class A common stock, payable to its shareholders on June 3, 2024. V’s four-year average dividend yield is 0.67%, and its current dividend of $2.08 translates to a 0.75% yield on the current price level.

With a strong payout history, the company’s dividend has grown at CAGRs of 16.8% and 15.9% over the past three and five years, respectively. Moreover, Visa has been growing dividends for 15 consecutive years, which makes it attractive to income-oriented investors.

What’s Ahead for Visa?

Street expects Visa to generate a revenue of $8.93 billion for the third quarter (ending June 2024), indicating a 9.9% increase compared to the same period last year. The company’s earnings per share for the ongoing quarter is expected to grow 11.9% year-over-year to $2.42. Moreover, V surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is promising.

For the fiscal year ending September 2024, analysts anticipate a revenue surge of 10.1% on a year-over-year basis, reaching $35.95 billion. They forecast that earnings per share will reach $9.96, up 13.6% year-over-year. Further, Visa’s revenue and EPS for the fiscal year 2025 are expected to grow 10.4% and 12.4% year-over-year to $39.70 billion and $11.19, respectively.

Bottom Line

As consumers shrugged off worries of a slowing economy to swipe cards on everything from travel to dining out, the credit card provider has delivered solid topline growth and healthy profit margins in its latest quarterly results.

Alongside leveraging partnerships to boost its digital capabilities, Visa has remained steadfast in pursuing substantial investments to complement the same. These initiatives are anticipated to increase transaction volumes and enhance customer retention, with the company projecting low double-digit net revenue growth for fiscal 2024 on an adjusted constant-dollar basis.

Moreover, UBS anticipates a solid 11% to 12% organic net revenue growth for the year, factoring in the currency-neutral basis and the performance observed throughout the year’s first half. Reflecting this positive outlook, the firm has raised its price target on V stock to $325, up from $315, while maintaining a buy rating on the shares.

Furthermore, the stock exhibits robust profitability, as evident in its 97.81% trailing-12-month gross profit margin, which is 63.6% higher than the 59.78% industry average. V’s trailing-12-month net income and levered FCF margins of 53.86% and 46.69% are 133.7% and 166.1% higher than the industry averages of 23.05% and 17.55%, respectively. Likewise, its trailing-12-month ROTA of 19.90% compares with the 1.06% industry average.

In terms of price performance, V shares have gained more than 15% over the past nine months and nearly 6% year-to-date. To that end, it could be wise to scoop up the shares of this Dow Jones card giant to garner potential gains.