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    Earn Gold Mine Royalties Just By Holding These Stocks

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    Editorial Staff
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    Investing in precious metals often seems to be reduced to two options. You can either buy physical gold/silver – the more straightforward, less risky option but often with the lowest returns, or invest in specific mining companies – which requires significant research and generally carries more risk.

    But there is another option that often goes overlooked– royalty companies. On the spectrum of risk for precious metal investing, royalty companies fall somewhere between metal and miner. But when it comes to returns, gold royalty companies have been outperforming for quite some time.

    Over the past seven years, royalty and streaming companies have significantly outperformed in both bull and bear markets. An index of five central precious metals royalty and streaming companies vastly outperformed gold and the GDX over the past seven years with a return of 128% versus gold’s return of 47% and the GDX’s return of 51%.  

    In this article, we’ll explain how precious metals royalty investments work and discuss some of the most desirable tickers in the group.  

    So what is a royalty company? A royalty company provides funding to the mining company for the tremendously expensive task of building a mine. Once the mine is producing, the royalty company receives a percentage of that production at a predetermined price or a share of the profit after the gold is sold.  

    Since the prices for mining output are already set, royalty companies can still make money even when gold prices are falling. Plus, they don’t participate in the operations of the mines themselves, so royalty companies don’t have to deal with the burden of operating costs and therefore take on much lower levels of debt than producers.

    Royalty companies also can pick and choose their projects and typically hold a diversified portfolio which minimizes concentration risk. If things take a turn for the worse with one project, the company usually has several more to fall back on. Plus, dividends of royalty companies are much more consistent and less affected by precious metal price movements compared to mining companies.  

    Royalty and streaming companies’ unique business model supports miners and produces cash flow, offering investors stability and returns even during gold price downturns. This is possible thanks to high-profit margins and exposure to a diversified investment portfolio with built-in upside. Without further ado, here are a few of the best precious metal royalty investment opportunities currently available.  

    Franco-Nevada Corp. (NYSE: FNV) is a gold-focused royalty company with additional interests in silver, platinum, oil, and other resource assets. They have a diversified portfolio of 112 producing assets, 42 advanced assets (not yet producing), and 250 exploration-stage mining properties. FNV generates around 91% of revenues from the Americas and 9% from the rest of the world and has invested $314 million in acquisitions in 2022.  

    With a global recession seemingly on the horizon, it’s a comfort to shareholders that FNV has zero debt, $2 billion in available capital, and is generating operating cash flow at a rate of $1 billion per year. Thanks to its low-risk/high-margin business model, it’s also largely immune to cost inflation. 

    Franco-Nevada actively manages its portfolio to maintain a diversity of revenue sources. However, the majority of its stakes are still in gold. In Q3, 77% of revenues were earned from precious metals, with the other 23% mostly coming from energy assets. More than 75% of revenue is expected to come from precious metals through 2025.  

    FNV stock has gained 17% over the past month, and the pros think this is just the beginning. A median price target of $161 represents a 12% upside from the current price.   The stock trades at a premium, with a forward P/E ratio of 38, and comes along with a 0.89% annual dividend.

    Canada-based Elemental Royalties (CVE: ELE) is an exceptional ground-floor opportunity in the royalties space with operations in the U.S., Australia, Africa, and South America. The emerging royalty company has acquired 12 royalties since 2017, including three gold royalties acquired in 2022 to the tune of $47.5M.

    An investment in Elemental Royalties is an opportunity to invest in high-quality royalties with exciting growth prospects. ELE’s royalties are uncapped, and no buyback options exist, so there are fewer limitations to the company’s performance. 

    It’s one of the most attractively priced precious metals royalty companies available with a trailing twelve-month price-to-revenue ratio of just 8, compared to peers like Metalla Royalty (NYSE: MTA), which currently trades at 89 times its revenue. As of Wednesday’s close, ELE traded at just CAD 1.25 per share.  

    Royalty Gold (NYSE: RGLD) is one of the world’s leading precious metals royalty companies. The Denver-based company holds 186 properties on five continents, including interests in 41 producing mines and 20 development-stage projects in some of the world’s most prolific mining regions in North America, South America, and Africa.  

    The company’s proven business model generates strong cash flow and high margins with a low-cost structure. As a result, RGLD’s solid balance sheet and access to liquidity provide the cash to finance these acquisitions without equity dilution in 2022. Last year,  Royal Gold reported an operating cash flow of $407.2 million, closing the year debt free, with net cash of $222 million and available liquidity of $1.2 billion.  

    Prospective investors with a long-term outlook should appreciate RGLD’s position as a sector leader when it comes to raising its dividend. In November 2021, the firm earned its inclusion as the first and only precious metals company in the S&P High Yield Dividend Aristocrats Index after 25 consecutive years of raising its dividend. Currently, investors enjoy a 1.35% annual yield.

    Three Stocks to Watch for the Week of November 28th

    By
    Editorial Staff
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    The major indices inched higher for the holiday-shortened week as FOMC meeting minutes fueled optimism that the Fed may soon begin to ramp down from the historically significant 0.75% rate hikes it has implemented in the past four consecutive meetings. A “substantial majority of participants” thought that a slowdown “would likely soon be appropriate,” according to the minutes from the Fed’s mid-November meeting, released Wednesday. The Dow gained 1.7%, the Nasdaq rose 0.7%, and the S&P 500 climbed 1.5% for the week, finishing above the 4,000 level for the first time in two months. As of Friday’s close, the S&P 500 has risen 12% from its recent mid-October low.  

    This week, the labor market will be in the spotlight with October’s Job Openings and Labor Turnover Survey (JOLTS) and ADP’s National Employment Report for November due for Release on Wednesday. Then on Friday, the Bureau of Labor Statistics will release its nonfarm payrolls report for November. Market watchers will get clarity on how inflation is affecting U.S. consumer spending with PCE data due out on Thursday. We’ll also find out if the U.S. housing market continued to cool in September with the release of S&P Global’s Case-Shiller National Home Price Index, slated for Tuesday. 

    Our team has three stock recommendations for the week ahead, the first of which may not come as a surprise, considering its strong performance this year. What is surprising is that this historically recession-resistant ticker is still so cheap. 

    It should be no surprise that the defense giant  Lockheed Martin (LMT) has outperformed the market this year. There are obvious geopolitical implications with the war in Ukraine. When Russia decided to invade its neighbor, both U.S. and European forces rushed in to help Ukraine. It may be some time before LMT stock pops again, as it did at the onset of Russia’s invasion of Ukraine. However, its order books are likely to improve due to rising defense budgets in the U.S. and abroad. Along with Lockheed providing support to Ukrainian resistance fighters, the looming uncertainties in Russia could lead to massive economic problems and gaps in power in the former Soviet Union-controlled areas. 

    Given the recession-proof nature of defense contracting, Lockheed Martin should continue reporting positive results and rewarding shareholders through its quarterly 2.7% forward yield. In other words, LMT will likely stand firm even if the market dives again. The company runs a P/E ratio of 24 times, below the sector median of 28.3 times. As well, LMT features excellent longer-term growth and profitability metrics.

    Global healthcare leader Eli Lilly And Company (LLY) has been creating high-quality medicines for over a century. The drug firm focuses on endocrinology, oncology, neuroscience, and immunology. Key products include Trulicity, Jardiance, Humalog, and Humulin for diabetes; Taltz and Olumiant for immunology; and Verzenio and Alimta for cancer.  

    In September, Lilly’s immunology drug Olumiant received emergency use authorization from the FDA to treat hospitalized COVID-19 patients. Moreover, the drug has produced impressive results from phase 3 trials examining Olumiant’s efficacy as a hair loss treatment.   

    The mega-cap pharmaceutical giant’s pipeline is locked and loaded with promising advancements, which means plenty of potential upcoming opportunities for investors to benefit from. In the first half of 2021, Lilly increased research and development spending for its up-and-coming treatment for diabetes Tirzepatide by 21% to $3.36 billion. The drug is currently in phase three trials and has already proven to be more effective than competitors.

    Berenberg Analyst Herry Holford recently upgraded Eli Lilly to Buy from Hold and raised the price target from $240 to $270. “Pipeline progress has effectively locked in Eli Lilly’s long-term sales growth, which now stands at 10% annually through 2030 versus a peer average of 4%,” Holford tells investors in a research note. The analyst says a “confluence of catalysts, superior growth, and superior returns” on Research and development, compounded by the recent pullback in the stock, prompts a revisit to the investment thesis.  

    The board of directors at Eli Lilly declared a fourth-quarter dividend of $0.85. LLY’s dividend payout for the year is set for the low 40% range, which should allow for robust future dividend growth.

    A strong pipeline and a stable dividend make Eli Lilly an attractive consideration. The pros on Wall Street also think so. Among 17 polled analysts, 12 say to Buy LLY, 4 call it a Hold, and only 1 rates the stock a Sell. A median 12-month price target of $279 represents a 12.6% increase from its current price.

    Pioneer Natural Resources Company (PXD) has long viewed sustainability as a balance of economic growth, environmental stewardship, and social responsibility. Its emphasis is on developing natural resources in a manner that protects surrounding communities and preserves the environment.

    In the wake of the pandemic, when energy prices were low, PXD struck an almost perfectly timed agreement to buy fellow Permian Basin producer Parsley Energy for $4.5 billion. If you’re wondering how PXD managed to finance that transaction, the answer lies in the fact that it was an all-stock deal that ensured Pioneer didn’t have a new giant debt load hanging over its head. The fact that Parsley operated primarily in the same region of West Texas, where Pioneer had both expertise and existing staff, has paid off over time.   

    That deal was a coup for Pioneer shareholders, built on the fact it was large and well-capitalized at a time when stressed and debt-reliant shale plays were looking for a white knight. On top of that acquisition, PXD also boosted its dividend by 25% at the start of the year as further evidence of its strong balance sheet.

    Investors can look forward to upcoming tailwinds, including Pioneer’s recently announced partnership with the world’s largest renewable energy producer, NextEraEnergy (NEE), to develop a 140-megawatt wind generation facility on Pioneer-owned land. The project will supply the company’s Permian Basin operations with low-cost, renewable power and is expected to be operational next year.  

    In the third quarter, revenue was up 22% YOY to $6.09 billion, smashing the consensus estimate of 4.57 billion. The company reported earnings of $7.48 per share, beating consensus expectations of $7.27 per share. So far, in 2022, the company has rewarded its investors handsomely with $20.73 per share through its generous 10.78% cash dividend. Even after gaining 30% this year, Pioneer shares likely still have valuation upside in addition to their tremendous dividend income potential.   

    Three Stocks to Avoid Next Week

    By
    Editorial Staff
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    0

    Seeking out great stocks to buy is important, but many would say it’s even more essential to know which stocks to steer clear of. A losing stock can eat away at your precious long-term returns. So, determining which stocks to trim or eliminate is essential for proper portfolio maintenance.  

    Even the best gardens need pruning, and our team has spotted a few stocks that seem like prime candidates for selling or avoiding. Continue reading to find out which three stocks our team is staying away from this week. 

    While the future remains bright for renewable energy, not all solar stocks are a buy. Provider of solar engineering and construction services, iSun Inc. (ISUN), has seen operating losses skyrocket alongside revenue increases in recent years.  

    iSun reported third-quarter 2022 revenue of $19 million, representing a 185% increase over the same period in 2021. Alongside top-line growth over the past year, the company has reported $22 million in operating losses. Operating income in the third quarter was a loss of $4.9 million compared to a loss of $1.6 million over the same period in 2021. YTD operating income was a loss of $16.2 million compared to a loss of $7 million during the same period in 2021.

    Given the company’s already high debt position after a series of acquisitions in 2021, the additional losses could force it to raise equity to de-lever its balance sheet, which could mean further declines for iSun.  

    The small, unprofitable solar company’s stock is down 76% over the past 12 months, but it’s far from a bargain considering the risk factor.  

    The dramatic shift from brick-and-mortar shopping to e-commerce over the past two years has been a tremendous obstacle for investors in retail. With interest rates marching higher as the economy slows, this is likely just the beginning of the pain for retailers.  

    Recent data suggests that 25% of America’s 1,000 malls will be closed in the next 3-5 years. As a cornerstone of shopping malls across the country, department store chain Macy’s (M) has been among the stocks to suffer. Over the past twelve months, M stock has declined 36% to trade at $22.23 a share.     

    Although Macy’s delivered a strong third-quarter report along with an increase to its earnings outlook, there are obstacles ahead for the iconic retailer. With the Federal Funds Rate at its highest level since 2008 and no sign of slowing down, the consumer economy faces unprecedented challenges. While anyone left holding M stock could enjoy a holiday bump, in the face of a looming recession, any increase seems likely to be short-lived. 

    There’s no question that electric vehicles are the future, but investors looking for bargains amid the market meltdown would be wise to steer clear of third-party companies specializing in EV charging stations like Blink Charging (BLNK). It’s much too soon to predict winners in this cutthroat niche of the EV industry, mainly because it’s still unclear if third-party charging kiosks will ever be profitable.  

    Analysts don’t see Blink becoming profitable before 2026. By then, the company will likely be looking at a much different landscape – a lot can change in three years. From the current vantage point, the near future looks murky for the entire EV industry, considering the massive layoffs that have occurred this year amid supply chain pressure and production restrictions in China.  

    Blink Charging shares have fallen 82% since peaking in early 2021 and are 61% lower year-to-date, but the stock is still trading at 19 times, trailing twelve-month revenue. For perspective, the price-to-sales ratio for the S&P 500 index as of November 1 was roughly 2.5. And this was also way higher than what the ratio has been historically. The current consensus is to Hold Blink stock. We’ll stick to the sidelines on third-party EV charging companies until EV industry headwinds subside.  

    Three Network Security stocks to Consider

    By
    Editorial Staff
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    One of the biggest threats to corporate America is ransomware. The growing possibility of losing access to essential or confidential digital property is a nightmarish scenario for executives, as the financial consequences can be enormous.  

    But it’s not just major companies that are at risk. We are all threatened with the loss of personal data security as hackers continue to develop new ways to exploit networks, software, and the array of evolving technology services. As the world advances to become more digitized, so too do its threats.

    According to Research and Markets, the global network security market size reached a valuation of $4.68 billion in 2021. Experts project that by 2027, the segment will command a valuation of $16.6 billion, representing a CAGR of 23.5% from 2023 estimates.

    Online security is a young, quickly evolving industry. Competition is heavy in the space, and demand continues to grow faster in both volume and complexity. Not all companies from the burgeoning subsector are set to last. In this article, our team examines three attractive tickers set to benefit as the demand for protection from cyber abuse continues to grow.

    Palo Alto Network Inc. (PANW) is a top choice for customers looking to stay ahead of quickly evolving cybersecurity threats. For ten years straight, the company has been named a market leader in network firewalls by leading research and advisory company Gartner. In fact, it achieved the highest position for ability to execute and the furthest position for completeness of vision in Gartner’s Magic Quadrant for Network Firewalls for 2021. Still, they haven’t been letting the recognition go to their head. Over the past few years, Palo Alto has been aggressively expanding its portfolio with big investments and acquisitions.    

    The groundbreaking acquisition of Bridgecrew, a developer-first cloud security company, enabled Palo Alto’s Prisma Cloud to become the first cloud security platform to deliver security across the entire lifecycle of an application, from the building stage to deployment to run. This is the most recent in a string of additions to its portfolio of NGS (next-generation security) services.

    In fiscal 2021, Palo Alto’s NGS services generated $1.18 billion in annual recurring revenue (ARR), representing roughly 28% of its top line and surpassing its prior ARR guidance of $1.15 billion. That segment’s accelerating growth complemented the stable development of its on-site appliances and services, and its total revenue increased by 25% for the full year. 

    Palo Alto serves more than 85,000 customers today, compared to about 9,000 customers nine years ago. The company expects its revenue to rise 24%-25% in fiscal 2022, and its stock trades at about fifteen times that forecast. Down 18% from its April high, PANW may be a solid choice to add to your portfolio. 

    The undisputed global leader in identity security, CyberArk (CYBR), has been gaining attention on Wall Street. The stock is up 12% over the past six months and could continue to gain heading into 2023. Regardless of any short-term earnings volatility, the potential for long-term, steady growth is too great to ignore.  

    CyberArk’s innovations occur across its self-hosted solutions and expanding SaaS portfolio of privileged access management, secrets management, and cloud privilege security offerings, helping its customers enable “Zero Trust” by enforcing least privilege. Under the framework of its Zero Trust approach, its teams can focus on identifying, isolating, and stopping threats from compromising identities and gaining privilege before they can do harm.

    The Israel-based company was recently named a leader in the Gartner Magic Quadrant for Privileged Access Management for 2021. It was awarded both highest in ability to execute and furthest in completeness of vision for the fourth time in a row. It comes as no surprise the business has been attracting customers to its subscription-based services, which means tremendously reliable cash flow, a good sign for anyone eyeing the small-cap.  

    For its third quarter, CyberArk reported a 133% growth acceleration from the previous year’s quarter of the subscription portion of its annual recurring revenue (ARR) to $255 million. Total ARR came in at $465 million, with growth Accelerating to 48%. Management also increased the full-year 2022 ARR Guidance Range to  $589-$601 million, up from a prior estimate of $583.5-$598.5 million.

    According to Mordor Intelligence, the application delivery controller market is expected to reach a valuation of $3.78 billion by 2026, representing a CAGR of 9.63%. One of the companies set to benefit most from the trend is A10 Networks (ATEN). Specialists, when it comes to the manufacturing of application delivery controllers, A10 leverages artificial intelligence protocols to provide automated protection against distributed denial-of-service (DDoS) attacks, which are increasing in relevance by the day.  

    Widening profit margins surfaced in the most recent quarterly results as earnings expanded faster than revenues. Second-quarter earnings came in at $0.20 per share, surpassing the consensus estimate of $0.18. Revenues were also upbeat at $72.1 million, representing a 10% increase from the same period last year and exceeding analyst expectations of $$71.02 million.

    “A10 is consistently achieving revenue and EPS targets despite a variety of macro headwinds in all regions. This demonstrates robust demand for our proprietary security-led solutions, disciplined execution, and a focus on diversification that drives sustainability. We have positioned our business to avoid concentration in any single geography, any specific customer type, or any isolated product offering, and this diversification enables consistent execution despite economic, supply chain, and geopolitical challenges. Customer-centric technical innovation, global commercial execution, and focus on driving the business model are bolstering our sustainability and driving continued success,” said Dhrupad Trivedi, President, and CEO of A10 Networks.

    The drastic earnings growth indicates the business is going from strength to strength. A trend that investors hope will continue well into the future. Management reiterated its full-year top-line growth target of 10 – 12% and expanding EBITDA in the range of 26 – 28% of revenue. A10 Networks certainly ticks a few boxes on the list of desirable qualities and seems well worth watching.

    Three Marijuana Stocks That Will Likely Do Well During a Recession

    By
    Editorial Staff
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     In 2017 and  2018, investors piled into cannabis stocks as word spread of the “next big thing.”  Canada made global history when it became the second country in the world and the first G7 nation to legalize cannabis federally. Emerging players spoke of big plans, which stoked investor enthusiasm. Amid the initial excitement, legislative progress was slow, and competition in the stifled marketplace kept prices low. By April 2019, early-stage growth hiccups caused share prices to change direction, and since then, the vast majority of pot stocks have seen a 50% decline in value.

    37 U.S. states and four U.S. territories have laws that permit the use of marijuana. While it is still  illegal on a Federal level, President Biden’s proclamation on October 7th included a request for the attorney general “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law.”  Many see this as a significant step in the right direction, but it’s expected to be a slow road.    

    The cannabis industry may not have been the explosive growth opportunity that early investors had anticipated, but there is still tremendous long-term upside, as more states jump on the bandwagon of legalizing recreational marijuana use.  A recent study showed that those who engage with marijuana consider it a secondary necessity. In other words, consumers will likely find other things to cut out of their budget if needed, making the demand for marijuana products virtually recession-proof. Plus, the correlation between the performance of marijuana stocks and the overall market is lower, which makes them helpful portfolio diversifiers.  

    Along with the possibility of tremendous upside opportunity, uncertainty is there. No one can predict when significant legislative changes will occur or how taxation will affect costs. Stock selection is critical in the Marijuana space. Investors should look for competitive companies with the liquidity to sustain themselves. In this list our team takes a look at three cannabis stocks that seem likely to weather a recession.

    The potential legalization of cannabis is likely to be a major positive catalyst for the leader in net cannabis revenue, Tilray (TLRY). The company has a presence in all key markets, with a focus on recreational and medicinal cannabis; the addressable market is significant and expanding. 

    TLRY surged following the recent announcement that President Biden would encourage the reassessment of marijuana laws but gave back some of those gains when the company reported Q1 2023 revenue and EPS misses. The company has its sights set on Revenue of $4 billion by 2024, a realistic target if regulatory hurdles wane. At $3.72 per share, TLRY currently trades at -6.5x forward earnings.   The stock remains deeply oversold and is worth buying even after the recent uptick.

    As long as marijuana remains illegal at the federal level, access to credit markets for pot companies will be spotty at best. Marijuana-focused real estate investment trust Innovative Industrial Properties (IIPR) buys medical marijuana cultivation and processing facilities in legalized states with cash and leases these properties back to the seller. It’s a win-win agreement that provides cash to cannabis companies while netting IIP long-term tenants.

    IIPR provides investors ground floor access to exponential growth potential along with the reliability of a REIT. As of early September, Innovative Industrial Properties owned 111 properties covering 8.7 million square feet of space in 19 states. Moreover, 99% of its tenants were on time with their rent as of the end of June. Over the past five years, IIPR’s quarterly payout has grown by 1,100%. The REIT currently boasts a 6.61% yield.

    Trulieve Cannabis (TCNNF) stands out as one of the few cannabis companies that have been able to turn a steady, meaningful profit, with four years of consistent quarterly profitability under its belt. That is, until its most recent quarter, when the company reported a net loss on the bottom line of $22.5  million, compared to the net income of $40.9 million reported for the previous year’s quarter. However, much of the loss can be attributed to one-time charges related to Trulieve’s recent acquisition of Harvest & Recreation Health. The quarterly net loss came in at around $1.1 million without the one-time charges.  

    While the company’s recent loss might be looked at as a step in the wrong direction, it’s common to see this following a major acquisition. Trulieve’s cannabis revenue has been following a steady upward trajectory since well before the acquisition took place. During the second quarter, Revenue increased by 49% year over year to $320.3 million. 

    The company has been steadily expanding operations, nearly tripling in size over the past few years. Since June of 2020, when it had just 52 dispensaries, all located in the state of Florida, the company operates 177 market-leading dispensaries throughout 11 states. It has successfully done so to preserve its position as a major player in this increasingly competitive market. Trulieve Cannabis garners a 100% Buy rating from the 18 analysts offering recommendations. A median price target of $28.71 represents a 169.62% upside. TCNNF stands as potentially one of the best picks to profit from the cannabis opportunity.

    Three Stocks to Watch for the Week of November 21st

    By
    Editorial Staff
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    0

    Despite Friday’s rally, stocks finished lower for the week as markets processed disappointing economic data and mixed corporate earnings.  Concerns about the pace of further U.S. interest-rate increases remained a focal point for many investors amid fresh data on inflation and retail sales.  The S&P 500 shed 0.7%, the Nasdaq lost 1.6%, while the Dow was unchanged for the week.  

    The week ahead will be shortened in observance of the Thanksgiving holiday.  Nevertheless, it will be packed with economic data releases, including minutes from last month’s FOMC meeting, consumer sentiment data, and new home sales.  Friday marks the start of the holiday shopping season.  Known as a day for astounding bargains, “Black Friday” is seen as a gauge of consumer confidence and retail sector strength heading into the holiday season.  Markets will be closed on Thursday and open for a shortened trading day on Friday.     

    Value-oriented shares have been performing well recently and have been supported by gains in the consumer staples sector.  Many experts are proclaiming that value stocks will be en vogue in 2023 – and indeed, many have already started to rally in 2022’s late innings.  Our first recommendation is a company from a defensive industry with a reputation for being resilient during times of economic weakness that’s currently trading at a discount and seems to be gaining traction as investors focus more on finding value. 

    Trusted neighborhood pharmacy Walgreens Boots Alliance (WBA) has always been a popular place for consumers, but like many consumer-driven businesses, Walgreens has been under pressure in 2022.  As both a healthcare play and a consumer staples retailer,  WBA is known for remarkable stability throughout the years in terms of margins and revenue, making it an attractive option for anyone seeking dependable value.  

    Last year, the company’s $5.2 billion investment in primary-care business VillageMD set the stage for the launch of doctor’s offices at hundreds of Walgreens locations across the country.  While management cautioned that it could take two years for the partnership to scale to “a reasonable level of operations” for patient investors, the collaboration will likely provide solid growth opportunities for the business.  Walgreens management sees 1,000 co-located clinics across more than 30 markets by 2027.

    Despite rallying more than 30% in recent weeks, WBA is still trading at a significant discount compared to peers.  WBA is valued at around 25% of total sales, compared to top competitor CVS Health (CVS), which is currently valued at about 40% of total sales.   CVS currently trades at nearly 12 times forward earnings, while WBA trades at less than 7.5 times earnings.  WBA also boasts an impressive 4.8% dividend yield, whereas CVS has a yield of just over 2%.  The stock is still down 25% this year but may continue to build on recent momentum as investors focus on value.     

    Video conference platform Zoom Video Communications (ZM) saw spectacular growth during the pandemic, as millions were forced to abruptly transition to working from home.  The share price surged in 2020 to $560 per share, only to decline 85% to its current price of almost $82.  No doubt that ZM has been a massive disappointment for those who bought in before the grand economic reopening.  But anyone who’s been eyeing the stock at this level may get an attractive entry in the coming days.     

    The company reported mixed Q2 results along with a revision lower for its fiscal 2023 guidance, which falls short of Wall Street expectations.  Zoom’s updated guidance calls for 7% annual growth, down from 11%. 

    Anyone with a longer-term outlook may wonder if Zoom’s pandemic-friendly business model can succeed now that most workers are back in the office at least part-time.  Considering that the company has been able to adapt and adjust to the unpredictable highs and lows of the past two years and remains profitable, chances are good that despite the transition from its high-growth days, Zoom isn’t likely fading away anytime soon.  The $5.5 billion in cash on its balance sheet should provide a nice buffer for long-term investors and a testament to how profitable the company has been in recent years.  Its strong balance sheet is highlighted by a cash-to-debt ratio of 56 times.  

    The consensus rating for ZM fell to Hold in the second quarter.  Consensus revenue and EPS expectations for the upcoming quarterly report have been cut 21 and 23 times in the past 90 days.  The consensus expects Q3 EPS and Revenue of $0.84 and $1.10 billion.  Anyone looking for a sign that the pandemic high-flier has fallen back to earth may look dead at one.  Zoom has exceeded EPS expectations in the 8 past consecutive quarters, missing revenue estimates only once in that timeframe.  

    U.S.-listed Chinese stocks rose after China announced it would ease quarantine restrictions for international travelers, a sign that China may be on the path to full reopening.   With the worst of China’s conditions seemingly in the rearview, it may be time to start looking at stocks from the group to add.  Our final recommendation on the list is one of the top choices among Chinese stocks, with an over 90% buy rating on Wall Street.    

    Founded in 2015, Pinduoduo (PDD) is one of the fastest-growing tech companies in the world.  The agriculture-focused e-commerce platform directly connects more than 12 million farmers with distributors and consumers through its interactive shopping experience, allowing users to participate in group buying deals.

    In 2017, the company ended its online direct sales model and transitioned to purely providing online marketplace services to third-party merchants across more categories.  According to Pinduoduo‘s July 2018 prospectus, this change from a first-party to a third party-marked the start of explosive growth.  From there, Duo Duo Live was launched in December 2019 as a live-streaming feature for merchants to promote their wares better.  Duo Duo Grocery, a next-day, click-and-collect grocery service, was rolled out in August 2020 as a response to the changing consumer needs for buying groceries in the wake of the COVID-19 pandemic.

    Since its Feb 2021 peak, PDD’s share price is down more than 64%.  The stock garners a solid Buy rating from the Wall Street pros offering recommendations and a median price target of $84, representing a 20% increase from Friday’s closing price.

    Three Stocks to Avoid Next Week

    By
    Editorial Staff
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    0

    Seeking out great stocks to buy is important, but many would say it’s even more essential to know which stocks to steer clear of. With fears of a global recession escalating, now is the time to prepare for the worst because a losing stock can eat away at your precious long-term returns. So, determining which stocks to trim or eliminate is essential for proper portfolio maintenance, especially now.  

    Even the best gardens need pruning, and our team has spotted a few stocks that seem like prime candidates for selling or avoiding. Continue reading to find out which three stocks our team is staying away from this week. 

    The dramatic shift from brick-and-mortar shopping to e-commerce over the past two years has been a tremendous obstacle for investors in retail. With interest rates marching higher as the economy slows, this is likely just the beginning of the pain for retailers.  

    Recent data suggests that 25% of America’s 1,000 malls will be closed in the next 3-5 years. As a cornerstone of shopping malls across the country, department store chain Macy’s (M) has been among the stocks to suffer. Over the past twelve months, M stock has declined 36% to trade at $22.23 a share.     

    Although Macy’s delivered a solid third-quarter report along with an increase to its earnings outlook, there are obstacles ahead for the iconic retailer. With the Federal Funds Rate at its highest level since 2008 and no sign of slowing down, the consumer economy faces unprecedented challenges. While anyone left holding M stock could enjoy a holiday bump, in the face of a looming recession, any increase seems likely to be short-lived. 

    Fintech company Upstart Holdings (UPST) management provided less than inspiring Q4 guidance last week when the company posted disappointing third-quarter results, sparking yet another sell-off for the stock. UPST’s share price is down more than 95% from its October ATH, and it may have more to go as bank partners tighten their fists.  

    Amid aggressive shifts in monetary policy, institutional lenders are less willing to fund Upstart’s loans than ever. It makes sense for backers to be so cautious in the current macroeconomic environment. Rising interest rates will continue to pressure consumers, leading to more defaults. Upstart is especially vulnerable as its AI models have yet to be tested during a significant down period in the credit cycle.  

    In the second quarter, Upstart more than doubled the amount in loans it funded with its own cash in just a single quarter. The company reported $600 million in loans on its balance sheet, up from $250 million in the previous quarter, severely exposing its balance sheet to credit risk at a terrible time. This contributed to Upstart’s third-quarter revenue miss and management’s decision to lower Q4 guidance. 

    Management sees Q4 revenue in the range of $125 million to $145 million. That implies revenue growth of roughly 18%, representing a sharp deceleration from the 252% revenue growth UPST delivered in Q4 2021. With growth momentum slowing while competition in the space is simultaneously growing, UPST is one stock to stay away from for now.  

    Food delivery leader and pandemic darling DoorDash (DASH) was one of the big winners in the shift to stay-at-home culture. Between 2019 and 2021, DASH revenue increased by 451% from $885 million to $4.88 billion. But once the economic reopening was complete, Wall Street’s enthusiasm over the stock sharply halted. Since hitting its peak in November of last year, the stock has plunged more than 75%. Now that the tide has washed out, investors are left to access what’s left, searching for an answer to the looming question – is profitability in the cards for DoorDash?

    DoorDash has never generated a profit, with the exception of the second quarter of 2020, where it made a profit of $23 million. “It took a global pandemic to drive the firm’s one-quarter profitability. The firm has not been profitable since, and we think it may never be,” said David Trainer, the CEO and founder of New Constructs.

    The company reported third-quarter revenue and EBITDA of 4% and $29M above consensus expectations, but DASH’s EPS is estimated to remain negative in 2022 and 2023. The company expects $49 to $51 billion in gross order volume in 2022, implying a modest 14% increase from $41.9 billion last year. However, that’s not enough to justify DASH’s lofty valuation. Currently, the stock trades at a trailing twelve-month price-to-sales multiple of 3.7, expensive compared to top competitors like Uber Technologies (UBER), which trades at a price-to-sales multiple of 1.9 – almost half that of DASH. 

    Three Dividend Paying Stocks That Should Not Be Overlooked

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    Editorial Staff
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    Amid unrelenting inflation and a strong potential for a recession, volatility is widely expected to continue as we head into the new year, making the job of selecting stocks difficult. A logical move in times like these is dividend stocks, which pay you just to hold them. Dividend-paying companies regularly reward investors directly with a portion of the cash flow. The most desirable dividend stocks have a history of raising payouts over time as the company’s profits grow.  

    In this list, we’ll take a look at three yield-paying stocks that seem ripe for the picking heading into the new year.  

    Pioneer Natural Resources Company (PXD) has long viewed sustainability as a balance of economic growth, environmental stewardship, and social responsibility. Its emphasis is on developing natural resources in a manner that protects surrounding communities and preserves the environment.

    In the wake of the pandemic, when energy prices were low, PXD struck an almost perfectly timed agreement to buy fellow Permian Basin producer Parsley Energy for $4.5 billion. If you’re wondering how PXD managed to finance that transaction, the answer lies in the fact that it was an all-stock deal that ensured Pioneer didn’t have a new giant debt load hanging over its head. The fact that Parsley operated primarily in the same region of West Texas, where Pioneer had both expertise and existing staff, has paid off over time.   

    That deal was a coup for Pioneer shareholders, built on the fact it was large and well-capitalized at a time when stressed and debt-reliant shale plays were looking for a white knight. On top of that acquisition, PXD also boosted its dividend by 25% at the start of the year as further evidence of its strong balance sheet.

    Investors can look forward to upcoming tailwinds, including Pioneer’s recently announced partnership with the world’s largest renewable energy producer, NextEraEnergy (NEE), to develop a 140-megawatt wind generation facility on Pioneer-owned land. The project will supply the company’s Permian Basin operations with low-cost, renewable power and is expected to be operational next year.  

    In the second quarter, revenue was up 22% YOY to $6.09 billion, smashing the consensus estimate of 4.57 billion. The company reported earnings of $7.48 per share, beating consensus expectations of $7.27 per share. So far, in 2022, the company has rewarded its investors handsomely with $20.73 per share through its generous 10.78% cash dividend. Even after gaining 30% this year, Pioneer shares likely still have valuation upside in addition to their tremendous dividend income potential.   

    Boston-based, Information management services company Iron Mountain Inc. (IRM) provides information destruction, records management, and data backup and recovery services to more than 220,000 customers in 58 countries. The company has around 1,500 leased warehouse spaces and underground storage facilities worldwide. 

    As a testament to Iron Mountain’s leadership in its core storage business, the company serves 225,000 customers, including about 95% of the Fortune 1000 companies. As for what the company stores, the wills of Princess Di and Charles Darwin are housed in their facilities, as well as the original recordings of Frank Sinatra and Bill Gates’ Corbis photographic collection.   

    The need for Iron Mountain’s physical facilities will likely never disappear. Still, as digital storage becomes more widely adopted, the company should continue to grow along with its global data-center business, contributing 8% of adjusted earnings in 2021. The fact it continues to generate over $2 billion per year in revenue from its core storage business while strategically growing its data center portfolio is an optimistic sign for steady growth in the coming years.  

    IRM has maintained a $0.62 per share quarterly dividend since 2019 as it has been focused on steadily recovering its payout ratio from the pandemic. The AFFO came in at $0.93 for the second quarter, a 9.4% year-over-year improvement. The company uses its recurring income to pay an attractive dividend — it currently yields 4.68%. Management’s target for a low to mid 60’s percent dividend payout ratio seems to be quickly approaching, after which they see the dividend increasing. 

    It should be no surprise that the defense giant  Lockheed Martin (LMT) has outperformed the market this year. There are apparent geopolitical implications with the war in Ukraine. When Russia decided to invade its neighbor, both U.S. and European forces rushed in to help Ukraine. It may be some time before LMT stock pops again, as it did at the onset of Russia’s invasion of Ukraine. However, its order books are likely to improve due to rising defense budgets in the U.S. and abroad. Along with Lockheed providing support to Ukrainian resistance fighters, the looming uncertainties in Russia could lead to massive economic problems and gaps in power in former Soviet Union-controlled areas. 

    Given the recession-proof nature of defense contracting, Lockheed Martin should continue reporting positive results and rewarding shareholders through its quarterly 2.7% forward yield. In other words, LMT will likely stand firm even if the market dives again. The company runs a P/E ratio of 24 times, below the sector median of 28.3 times. As well, LMT features excellent longer-term growth and profitability metrics.

    Three Mid-Cap Tech Stocks to Snap Up Before It’s Too Late

    By
    Editorial Staff
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    0

    With the Nasdaq solidly in a bear market, most market participants are busy talking about the steep losses tech names have suffered. But in the long term, the technology sector will be a force to reckon with in the market, and if history repeats itself, stocks from the technology sector could start their path to recovery sooner than other stocks. Following the dot-com bubble and the financial crisis of 2008, the tech-heavy Nasdaq Composite hit its trough long before the S&P 500. 

    This go around, for innovation-focused investors, the potential of some mid-cap tech stocks (stocks with a market cap. that is > $2 billion and < $10 billion) should not be ignored. While small-cap stocks are often fast-growing but volatile, and large-cap stocks tend to be slow growing and relatively stable, the best mid-caps tend to fall in between: less volatile than fast-moving small caps but with more growth potential than mammoth large-cap companies. Top-ranked mid-cap stocks have a high potential to enhance their profitability, productivity, and market share.

    Our research team has a few recommendations for mid-cap tech stocks poised to take off when the technology sector regains traction.  

    DXC Technology Co. (DXC) is a provider of information technology services and products targeting IT modernization, including both on-premises and cloud services, as well as data-driven operations and workplace modernization. The company serves 6,000 customers globally across the private and public sectors and has a market cap of $6.55 billion.

    For its second quarter, DXC Technology reported $3.57 billion in revenue, down 11.5% year-over-year and slightly higher than the $3.55 billion Wall Street was expecting. The company reported $0.75 earnings per share for the quarter, beating the consensus estimate of $0.73.   

    “I am pleased with our second quarter results, where we delivered organic revenue, margin, and EPS at the top end of our guidance range. This is the kind of strong performance that we are accustomed to, as our revenue performance is one of the best results we have delivered, and our margins are clearly benefiting from our cost optimization program. All of this gives us confidence that we have built a quality company that is well-positioned to achieve our short-term and long-term goals,” commented  Mike Salvino, DXC Chairman, President, and CEO.

    DXC’s share price has fallen 15% in 2022, leaving them priced at only around eight times this year’s projected earnings. Short-term, prolonged market weakness could continue to weigh heavily on the stock, but those with a longer-term outlook will likely appreciate a deeper pull-back as an opportunity to get in at a better price.  

    Founded in 2001, Canadian Solar Inc. (CSIQ) is a leading manufacturer of solar photovoltaic modules and a provider of solar energy solutions. CSIQ has delivered around 52 GW of solar modules to thousands of customers in more than 150 countries through the end of 2021, reaching approximately 13 million households. Canadian Solar derives roughly 47% of its revenue from Asia, 35% from the Americas, and 18% from Europe and everywhere else.

    Canadian Solar is one of the most bankable companies in the solar and renewable energy industry, having been publicly listed on the NASDAQ since 2006. With a market cap of $2.8 billion, the company has the potential to advance based on its continued business growth, favorable earnings, and revenue outlook.

    Benefitting from renewed interest in renewable energy solutions, Canadian Solar posted revenue of $2.31 billion in Q2 of this year, up nearly 62% from the year-ago quarter. CSIQ is up 19% year to date, while the Nasdaq index is down 29% during the same period, making Canadian Solar intriguing on a relative level. Moreover, the share price remains 39% below its February 2021 peak, and now may be a good time to buy before the next leg up.  

    Online security is a young, quickly evolving industry. Competition is heavy in the space, and demand continues to grow faster in both volume and complexity. Not all companies from the burgeoning subsector are set to last. The undisputed global leader when it comes to identity security, CyberArk (CYBR), has been gaining attention on Wall Street. The stock is up 26% over the past six months and could continue to gain heading into 2023. Regardless of any short-term earnings volatility, the potential for long-term, steady growth is too great to ignore.  

    CyberArk’s innovations occur across its self-hosted solutions and expanding SaaS portfolio of privileged access management, secrets management, and cloud privilege security offerings, helping its customers enable “Zero Trust” by enforcing least privilege. Under the framework of its Zero Trust approach, its teams can focus on identifying, isolating, and stopping threats from compromising identities and gaining privilege before they can do harm.

    The Israel-based company was recently named a leader in the Gartner Magic Quadrant for Privileged Access Management for 2021. It was positioned both highest in the ability to execute and furthest in completeness of vision for the fourth time in a row. It comes as no surprise the business has been attracting customers to its subscription-based services, which means tremendously reliable cash flow, a good sign for anyone eyeing the small-cap.  

    For its third quarter, CyberArk reported a 133% growth acceleration from the previous year’s quarter of the subscription portion of its annual recurring revenue (ARR) to $255 million. Total ARR came in at $465 million, with growth accelerating to 48%. Management also increased the full-year 2022 ARR Guidance Range to  $589-$601 million, up from a prior estimate of $583.5-$598.5 million. With a market cap of $6.21 billion, CYBR is one of the top choices of mid-cap cybersecurity stocks available.

    Three Solar Stocks to Consider Now

    By
    Editorial Staff
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    0

    The solar industry has had a bumpy 2022 as supply chain disruptions, rising production costs, and labor shortages have hampered the sector, but there’s no denying its long-term exponential growth. Over the last decade, solar energy has witnessed an average annual growth rate of 49%. This phenomenal growth is due partly to strong federal policies like the Solar Investment Tax Credit, which currently provides a 26% tax credit on solar investments.  

    Another factor that is fueling growth in the industry is declining prices for solar components and installation. The cost of solar has plunged 90% over the past decade, along with falling equipment and infrastructure prices. An average-sized residential system has dropped from a price of $40,000 in 2010 to roughly $20,000 today.  

    The growth in solar is hardly restricted to the residential sector. Solar power has helped many Fortune 500 companies cut back on costs. Apple, Amazon, Target, and Walmart have all invested heavily in solar production at various locations around the country. Apple is leading the way with more than 390 MWs of commercial capacity, and Amazon is a close second with 329 MWs.

    Solar power isn’t going anywhere anytime soon, so continued growth can be expected in the long term. Business Insights projects that the $163 billion global solar industry will reach $194.75 billion by 2027, exhibiting a CAGR of 6%. This article will compare some of the top solar investments available.   

    The Invesco Solar ETF is a great way to gain exposure to solar without investing in just one stock. The fund seeks to track the MAC Global Solar Energy Index and is comprised of about 35 individual components — including both U.S. and international stocks. The fund follows a blended strategy, investing in value and growth stocks with various market caps.  

    TAN’s share price peaked in mid-February 2021 and has fallen 37% since. However, it could be an excellent opportunity to get in at a more attractive price, as growth in the solar industry will likely gain strength in the long term.

    ETFs, by their nature, are often considered a less risky investment as they tend to be much less volatile than individual stocks. If you’re unsure about which solar stocks to buy and want to cut back on potential risk, TAN is a relatively safe way to add solar energy to your investment portfolio.    

    Invesco Solar ETF (TAN)

    • Weighted Average Market Cap  $8.10B
    • Price / Earnings Ratio   44.39
    • Price / Book Ratio  2.32
    • YTD Return  8%
    • Yield  0.10%
    • Expense Ratio  0.66%
    • Net Assets   2.31B
    • Number of Holdings  147
    • Top Holdings  Enphase Energy, SolarEdge Technologies, Sunrun  

    Of course, compared to other solar investments, a less risky ETF investment probably won’t provide exponential returns in the near term. For investors with a higher tolerance for volatility, investing in an individual company is likely the more desirable choice. But due to high levels of competition in the space, not all solar companies are guaranteed to sustain. It’s essential to be selective when evaluating solar stocks and choose companies with a proven reputation and a strong balance sheet. In the next section, we’ll cover two of the top solar stock choices available. 

    Arguably one of the best-positioned names to benefit from the new act,  First Solar Inc. (FSLR) is a leader in the solar industry. Unlike many burgeoning solar companies, they have a rock-solid balance sheet that can handle the challenges of an economic downturn.  

    One of the most popular solar stocks to buy, First Solar, provides solar panels and photovoltaic power plants. What sets the company apart from the competition is its ultra-thin semiconductor technology, which provides enhanced resilience and efficiency for its modules.  

    There is plenty of upside in the sector and room for growth. Overall, solar energy only accounts for around 2% of the total grid usage. First Solar is preparing for growing demand as that number is primed to increase.  

    FSLR was the beneficiary of multiple upgrades recently, including one from JPMorgan’s Mark Storuce, who upgraded the stock from Neutral to Overweight. “FSLR has nearly 3 GW of US-based module capacity, expanding to 5.9 GW by year’s end 2024 that will qualify for the domestic manufacturing tax credit,” he wrote, adding that the value of the credits could add $931 million to the company’s 2024 net income.  

    Founded in 2001, Canadian Solar Inc. (CSIQ) is a leading manufacturer of solar photovoltaic modules and a provider of solar energy solutions. CSIQ has delivered around 52 GW of solar modules to thousands of customers in more than 150 countries through the end of 2021, reaching approximately 13 million households. Canadian Solar derives roughly 47% of its revenue from Asia, 35% from the Americas, and 18% from Europe and everywhere else.

    Canadian Solar is one of the most bankable companies in the solar and renewable energy industry, having been publicly listed on the NASDAQ since 2006. The company has the potential to advance in the upcoming months based on its continued business growth, favorable earnings, and revenue outlook.

    Benefitting partially from renewed interest in renewable energy solutions, Canadian Solar posted revenue of $1.25 billion in Q3 of this year, up nearly 15% from the $1.09 billion in sales posted in the year-ago quarter. CSIQ is up 16% year to date, while the Nasdaq index is down 29% during the same period, making Canadian Solar intriguing on a relative level. Moreover, the share price remains 40% below its February 2021 peak, and now may be a good time to buy before the next leg up.  

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