This 5%-Yielding Dividend Stock Just Made Investors Even More Money. Here's How.
Realty Income (NYSE: O) has been a money-making investment over the years. The real estate investment trust (REIT) has paid dividends like clockwork. It recently paid its 650th consecutive monthly dividend.
The REIT routinely raises its dividend payment. It most recently delivered its 126th dividend increase since coming public in 1994, pushing its dividend yield further above 5%. That was its fourth dividend increase already this year. It has now given investors a raise in 107 straight quarters and 30 consecutive years, growing its payout at a 4.3% annual rate during that timeframe, including by more than 3% over the past year.
Here’s how it’s able to continue paying its investors even more money.
Built to produce stable income
Realty Income focuses on owning a portfolio of income-generating commercial real estate. The company owns a diversified portfolio of 15,450 retail, industrial, gaming, and other properties across the U.S. and Europe. It primarily owns properties leased to tenants in industries resilient to economic downturns and isolated to the pressures of e-commerce, such as grocery, convenience, dollar, and drug stores.
The REIT signs long-term net leases for these properties with high-quality tenants. That lease structure requires tenants to cover building insurance, real estate taxes, and routine maintenance expenses. Its leases also typically feature some form of annual rental rate escalation clause. They provide the REIT with very stable income that tends to rise by about 1% annually when factoring in bad debt expenses.
Realty Income typically pays out a conservative percentage of its income in dividends, less than 75% of its adjusted funds from operations (FFO). That gives it a nice cushion while enabling it to retain a meaningful percentage of its cash flow to fund new investments.
It also has an elite balance sheet. It’s one of only eight REITs in the S&P 500 with two A3/A- credit ratings or better. Realty Income also has very low leverage ratios, giving it even more financial flexibility.
Multiple growth drivers
Realty Income’s strong financial profile enables it to steadily expand its portfolio. The company’s retained cash flow after paying dividends alone can help fund enough new investments to grow its adjusted FFO by around another 1% per year after factoring in the impact of refinancing maturing debt in today’s higher-interest-rate environment. Add in rent growth, and the REIT can internally deliver around 2% annual growth.
Meanwhile, Realty Income’s elite balance sheet gives it plenty of financial flexibility to externally fund accretive acquisitions. The REIT estimates that for every $1 billion of additional real estate investments it makes, it can add 0.5% to its annual adjusted FFO. It conservatively expects externally funded acquisitions will add another 2% to 3% to its adjusted FFO each year. Add in its internal growth drivers, and Realty Income should grow its adjusted FFO per share by 4% to 5% per year. Factor in its high-yielding dividend, and its total return should be around 10% annually.
The REIT should have no shortage of investment opportunities. It estimates that the total addressable global net lease real estate market is $14 trillion. That gives it a long growth runway. Meanwhile, it has steadily expanded its opportunity set by adding new property verticals. In recent years, it has added data centers, gaming properties, and new European markets to its portfolio. It has also launched a credit investment platform. These new platforms have opened the doors to additional growth opportunities.
Realty Income should continue making investors more money
Realty Income built a money-making real estate empire. The company’s durable and growing portfolio prints cash, which it distributes to investors via a steadily rising dividend. With a sound financial profile and a long growth runway ahead, this REIT should continue making money for its investors in the coming years.
Should you invest $1,000 in Realty Income right now?
Before you buy stock in Realty Income, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Realty Income wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 22, 2024
Matt DiLallo has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.
This 5%-Yielding Dividend Stock Just Made Investors Even More Money. Here’s How. was originally published by The Motley Fool
These Prominent Billionaires Just Invested $700 Million in 2 Dow Jones Dividend Stocks
Bill Ackman of Pershing Square Holdings and Andreas Halvorsen of Viking Global Investors are two highly regarded billionaire-level investment managers. In the second quarter, their companies added new positions in two stocks that just happen to be members of the prestigious Dow Jones Industrial Average, an index that tracks 30 blue chip stocks.
Ackman’s firm reported a position worth $229 million in Nike (NYSE: NKE), while Viking Global disclosed a $478 million investment in McDonald’s (NYSE: MCD). Let’s explore why these billionaires like these stocks even as both are navigating headwinds in the apparel and restaurant industries right now.
1. Nike
Ackman has a knack for spotting value where others don’t. Over the last 20 years, Pershing Square delivered annualized returns of 16%, and his net worth has grown to $9 billion in recent years, according to Forbes.
Share prices of Nike are down 53% from highs set in 2021, which led Ackman’s Pershing Square to start a new position in Q2. The top athletic apparel brand was hit by weak consumer spending trends that challenged several retailers over the past couple of years.
Nike is a large company that generates $51 billion in annual revenue, two-thirds of which is from footwear. Fiscal 2024 (which ended in May) revenue was flat year over year. However, most of the weak sales trends are associated with Nike’s lifestyle products. Its performance products for several sports its services are still posting a double-digit sales increase last quarter.
This suggests Nike has a clear path to improvement if it shifts more of its sales mix to performance products, like running and basketball shoes, which have been the heart of the brand for 50 years.
Meanwhile, Nike is keeping profits up to fuel dividend payments to shareholders. Its net income grew 12% in fiscal 2024, and it paid out 38% of its earnings in dividends. At its current quarterly payout of $0.37 per share, Nike’s forward dividend yield is 1.76% — its highest yield in a decade.
The stock still trades at a fair valuation, but its forward price-to-earnings (P/E) ratio is at 26, which isn’t cheap. Still, it’s a reasonable price for a top brand that can still grow its earnings at double-digit rates over the long term.
The recent investment suggests Ackman believes Nike’s brand is undervalued by investors right now. Nike has a clear solution to return to growth by doubling down on innovation within its sports categories, and good execution against this strategy could send the stock back toward its previous highs within the next two years.
2. McDonald’s
Viking Global Investors founding partner and CEO Andreas Halvorsen has a net worth of $7.2 billion, according to Forbes. The company manages a large U.S. equity portfolio, worth $26 billion at the end of Q2. One of its new positions is a $480 million stake in McDonald’s.
Like Nike, McDonald’s reported weak sales under macroeconomic headwinds this year. Because this weakness is spreading across multiple industries, it doesn’t reflect anything negative about McDonald’s competitive position. This environment plays to McDonald’s strength as a value-based brand.
The Golden Arches reported a 1% year-over-year decrease in global comparable sales in Q2. Despite this soft performance, the stock held up well this year and is close to hitting new highs. The reason for the stock’s performance in light of weak sales might explain why Viking Global likes it.
McDonald’s is more than just fast food. It’s also a real estate company. It has a long history of owning the land its franchised restaurants sit on, which provides lucrative opportunities in leveraging these property values to ultimately deliver profitable growth for shareholders.
As of Dec. 31, 2023, the company held $20 billion of buildings and improvements on owned land on its balance sheet. It owned approximately 57% of the land and approximately 80% of the buildings used by its restaurants.
McDonald’s plans to increase its global restaurant base to 50,000 by 2027, which obviously will take advantage of its real estate expertise.
The combination of its franchise model, where 95% of its global restaurants are run by local owners, and its real estate strategy is why McDonald’s generated a high margin of $8 billion in net profit on $25 billion of revenue over the last year.
While McDonald’s posted an 11% year-over-year decline in earnings last quarter, it pays out around half of its earnings in dividends. It currently pays a quarterly dividend of $1.67, bringing its forward yield to 2.3%. That dividend appears very safe, given the manageable payout relative to earnings and McDonald’s profitable franchise business strategy.
The stock’s above-average dividend yield and attractive forward P/E of 24 make it a solid buy for the long term.
Should you invest $1,000 in Nike right now?
Before you buy stock in Nike, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nike wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 22, 2024
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool recommends the following options: long January 2025 $47.50 calls on Nike. The Motley Fool has a disclosure policy.
These Prominent Billionaires Just Invested $700 Million in 2 Dow Jones Dividend Stocks was originally published by The Motley Fool
Wall Street Got It Wrong About Plug Power. Here's Why.
The stock of hydrogen fuel developer Plug Power (NASDAQ: PLUG) has been a bumpy ride. But since the start of 2021, that ride has been consistently lower. Back then, the stock was valued as high as $70 per share. Today, the share price is below $3.
Wall Street has been consistently wrong about where the stock price is headed next. In 2021, right before shares collapsed, nearly a dozen firms had a buy rating on the stock.
Wall Street expectations have come down sharply since those highs, but the average price target remains at nearly $5 per share — more than double the current share price. Could analysts finally be right? Is now the time to bet big on Plug Power? The answer might surprise you. (NYSE: GS)
This is why Wall Street can’t predict Plug
One of the biggest reasons why Wall Street has struggled to accurately predict the direction of Plug Power stock is that its cash flow inflection point could be years, if not decades, into the future. Goldman Sachs analysts have specifically called the company out for its distant cash flow projections. According to those analysts, Plug Power has an equity duration of 25.8 years. That means that the weighted average of the company’s expected cash flows is around 26 years. Take note that a bond of similar duration would be considered very long-term.
Because Wall Street often uses a discounted cash flow model to value a company, they must estimate and then discount projected cash flows back to the present. The more distant a cash flow is, the more sensitive it is to changes in assumptions.
Barring a sudden change in regulatory policy, it’s likely that hydrogen fuel cell demand won’t reach its biggest inflection point until 2030 at the earliest. As global consultancy McKinsey recently concluded, “Global clean hydrogen demand is projected to grow significantly to 2050, but infrastructure scale-up and technology advancements are needed to meet projected demand.” These infrastructure gaps will take many years to resolve. Until then, Plug Power will likely be spending billions in capital expenditures despite operating a money-losing business. Over the last year, for example, the company has spent between $100 million and $200 million per quarter building new plants and other infrastructure required for growth. Yet over that time period, net losses totaled well over $1 billion — more than half of the company’s entire market cap today.
This all adds up to why Wall Street has been so wrong about Plug Power over the years. Analysts were required to project cash flows that were far into the future. With mounting losses, increased competition, and higher interest rates, these projected cash flows have been pushed out even further into the future, having an outsized negative effect on the share price.
Can Plug Power stock really rise by 130%?
There’s one important question to ask right now: Is this time different? The average one-year price target for Plug Power stock right now is $4.91. That’s around 130% higher than the current stock price. But it’s important to know that there’s a huge variance between predictions. One price target, for instance, is nearly $19 per share, while others are as low as $1.52 per share.
Can Plug Power stock actually rise by 130%? It’s doubtful. All of the pressures that led to the company’s share price collapse in recent years persist to this day. In fact, they may be stronger than ever before. While new regulations and incentives are growing more accommodating for hydrogen demand growth, it’s clear that a potential transition would still take decades. The economics and infrastructure to scale clear hydrogen fuel simply aren’t in place yet. Meanwhile, Plug Power’s financial resources continue to dwindle. Last year, the company’s auditors issued a going concern notice, indicating that insolvency was imminent if drastic measures weren’t taken. Plug Power addressed those concerns by massively diluting shareholders, something it continued to do in recent quarters.
Plug Power is simply between a rock and a hard place right now. Its persistent losses force it to continually tap the debt and equity markets. Yet positive cash flows remain many years away. This limits its ability to invest in new innovation, allowing competitors to develop newer, cheaper, more efficient solutions. Wise investors should stick to the sidelines for now.
Should you invest $1,000 in Plug Power right now?
Before you buy stock in Plug Power, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Plug Power wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 22, 2024
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and JPMorgan Chase. The Motley Fool has a disclosure policy.
Wall Street Got It Wrong About Plug Power. Here’s Why. was originally published by The Motley Fool
Swiss finance minister chides US, Europe over 'time bomb' debt levels
ZURICH (Reuters) – Debt levels in the United States and Europe are a risk for international financial stability and for Switzerland, Swiss Finance Minister Karin Keller-Sutter said in a newspaper interview published on Saturday.
In an interview with Swiss daily Blick, Keller-Sutter extolled Switzerland’s “disciplined” finances, which she said had enabled the country to deal with the economic challenges posed by the COVID-19 pandemic and Russia’s invasion of Ukraine.
By contrast, other countries are “so indebted they’re hardly able to act any more”, she said, giving France as an example.
“Or take a look at America. That’s a time bomb. The mini-crash on the stock markets at the start of August was a warning shot,” the minister was quoted as saying.
“It was an expression of investors’ fear of a recession. Debt levels in the U.S. and Europe are a risk to international financial stability and a risk for Switzerland,” she added.
Keller-Sutter also discussed a government proposal to make Swiss bank UBS hold more capital in the wake of its acquisition of former rival Credit Suisse following its collapse last year.
She defended the additional capital requirements as necessary to protect Switzerland from another banking meltdown.
UBS CEO Sergio Ermotti has criticised the proposal, and she was asked whether she was in touch with him about it, saying:
“No, I haven’t been in contact with him any more. This is now a normal political process.”
The paper also asked what she thought about speculation that UBS could shift its headquarters abroad if it felt conditions in Switzerland were no longer right for it.
“The Federal Council (cabinet) believes it’s good for the economy to have a large Swiss bank. But the bank must decide for itself how it wants to position itself.”
UBS has said repeatedly it is committed to Switzerland.
(Reporting by Oliver Hirt; Writing by Dave Graham; Editing by Helen Popper)
Got $5,000? 2 Top Growth Stocks to Buy That Could Double Your Money.
While $5,000 might not seem like much to some, with the power of investing, that money can turn into $10,000, $20,000, and $50,000 over time. Thanks to compounding, your money will grow faster the longer it’s invested, so it’s always a good idea to get started investing sooner rather than later.
If you’re looking to double your money — and have some patience — keep reading to see two stocks that could turn $5,000 into $10,000 in due time.
1. Redfin
Redfin (NASDAQ: RDFN) was a big winner during the pandemic, but shares of the real estate platform tumbled in the bear market as interest rates spiked, and it has stayed down since then.
However, economic conditions are starting to change, and Redfin looks poised to capitalize on it. First, a recent settlement with the National Association of Realtors will change the way commissions in the real estate industry work, which could benefit Redfin, as it has led the fight against high commission fees.
More importantly, the company is set to benefit from falling interest rates as the housing market is showing signs of finally turning. Interest rates on 30-year fixed mortgages have fallen to 6.5%, the lowest rate in more than a year, and mortgage rates look set to come down further when the Federal Reserve is expected to start lowering interest rates at its September meeting.
Falling rates will lower monthly payments, spurring increased demand and encouraging more housing inventory to come on the market, which will benefit Redfin. There’s substantial pent-up homebuying demand in the market, and home sales could spike as rates come down because many would-be sellers are waiting for rates to fall enough to justify giving up a low-rate mortgage.
During the downturn, Redfin has cut costs and shuttered its iBuying program, which should help improve margins in the recovery. Additionally, the company has invested in digital businesses that have already started to pay off, as it’s added a self-service platform for agents, homeowners, and renters.
Redfin currently has a market capitalization of just $1 billion, meaning it trades at a price-to-sales ratio of around 1. If the housing market cooperates and the company returns to growth, the stock could easily double from here.
2. Super Micro Computer
Another stock with a lot of potential to double is Super Micro Computer (NASDAQ: SMCI), the fast-growing maker of servers that are popular for running artificial intelligence (AI) applications.
In order for the stock to double, Supermicro would only have to recoup its losses since March. The stock skyrocketed through the end of 2023 and the beginning of 2024 as investors discovered its rapid AI-driven growth. However, the stock has given up some of those gains as it fell following a surge when it was admitted to the S&P 500. Broader concerns about the AI boom and falling gross margins have also weighed on the stock.
Still, its most recent earnings report shows the stock is still putting up blockbuster growth numbers. Revenue jumped 143% in its recently reported fiscal fourth quarter to $5.3 billion, and it expects even faster growth in the current quarter, forecasting a top-line increase of 183%-230%. Adjusted earnings per share in the quarter nearly doubled from $3.51 to $6.25.
Supermicro looks like a great candidate to double because the company expects margins to expand this year as it monetizes earlier investments, and it benefits from the launch of a new direct liquid cooling system.
Super Micro Computer stock is also cheap, especially for a company growing as fast as it is. It currently trades at a price-to-earnings ratio of just 31, which seems to reflect recent skepticism about the long-term potential of AI.
However, Supermicro is growing quickly, and there’s a long runway of growth as companies continue to invest in AI infrastructure to develop artificial general intelligence. At its current price, the stock looks like a good bet to turn $5,000 into $10,000.
Should you invest $1,000 in Super Micro Computer right now?
Before you buy stock in Super Micro Computer, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Super Micro Computer wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 22, 2024
Jeremy Bowman has positions in Redfin. The Motley Fool has positions in and recommends Redfin. The Motley Fool recommends the following options: short August 2024 $11 calls on Redfin. The Motley Fool has a disclosure policy.
Got $5,000? 2 Top Growth Stocks to Buy That Could Double Your Money. was originally published by The Motley Fool
Prediction: Nvidia Will Deliver Record Results on Aug. 28, Which Will Supercharge the Stock
Recent advances in artificial intelligence (AI) are causing a paradigm shift in technology, and the consequences will likely be far-reaching. Nvidia (NASDAQ: NVDA) has become the de facto standard bearer for the AI revolution, as its state-of-the-art graphics processing units (GPUs) have become the gold standard for training AI models and conducting AI inference.
The accelerating adoption of generative AI has been the catalyst that has sparked parabolic growth for the chipmaker, generating triple-digit sales and profit growth in each of the past four quarters.
Nvidia is scheduled to report the results of its fiscal 2025 second quarter (ended July 30) after market close on Wednesday, Aug. 28, and shareholders will be watching with keen interest. I predict the company will deliver record results, sending Nvidia stock to record heights. Here’s why.
You can’t spell Nvidia without AI
Nvidia made a name for itself as a pioneer in the video game industry, developing chips that used parallel processing, or the ability to run a multitude of complex computations simultaneously. This generated lifelike images in video games, revolutionizing the industry. Nvidia adapted this same technology to handle the raw, number-crunching needs of AI and quickly cornered the market in this emerging technology.
The vast majority of AI processing takes place in data centers, and Nvidia has already proven its worth at zipping information through the ether. The company controlled an estimated 98% of the data center GPU market last year, according to data compiled by semiconductor analysts at TechInsights.
The growing demand for AI has data center and cloud operators spending heavily to upgrade their capabilities to handle the rigors of AI processing. Making AI available to the masses is expected to unleash a wave of productivity that’s expected to add trillions of dollars to the global economy.
While Nvidia had a head start in this emerging industry, the company isn’t resting on its laurels. Earlier this year, the company unveiled its Blackwell architecture, which contained a host of new technology that promises to take AI to the next level.
Perhaps more impressive is the GB200 Grace Blackwell Superchip, which connects two B200 GPUs with an Nvidia Grace CPU to form “the world’s most powerful chip” for AI.
While there have been reports of a potential launch delay, more recent reports suggest Nvidia is still on track to begin shipping its next-generation AI chip early next year.
This all helps to illustrate that Nvidia has no plans of ceding its strategic advantage or market-leading position anytime soon.
Why its second-quarter financial report will be a key catalyst
Nvidia has proven its mettle over the past year, but investors are looking to the future. Concerns about inflation and the growth of the economy have taken center stage in recent weeks, with economists debating whether the Federal Reserve Bank has waited too long to lower interest rates or whether it can still engineer a soft landing — bringing inflation under control, without tipping the economy into a recession. Those fears have begun to subside, so investors are turning their sights to Nvidia, which is widely viewed as a bellwether for the state of AI adoption.
A look back at Nvidia’s outlook in recent quarters can provide much-needed insight into what investors should expect next week. In each of the past four quarters, Nvidia has delivered triple-digit growth, which has outpaced its own guidance, and in each instance by a fair margin. Nvidia’s revenue growth has sailed past its outlook by a margin of between 8% and 19%, which suggests the company’s current forecast is equally conservative.
For its fiscal 2025 second quarter (ended July 30), Nvidia is guiding for revenue of $28 billion, representing an increase of 107% year over year. Wall Street is even more enthusiastic, with analysts’ consensus estimates rising to $28.6 billion. Even that may end up being conservative, as Nvidia has surpassed investor expectations for sales and profits in each of the past four quarters — again by a fair margin.
If Nvidia beats its own revenue guidance by at least 8% or more — which it has done in each of the preceding four quarters — that would put its revenue at $30 billion or more. If that’s the case, it will likely come with a commensurate increase in its guidance, resulting in a classic “beat and raise.” Since this is almost always a bullish signal, the stock price will likely jump in response.
To be clear, investors will be watching Nvidia’s forward-looking guidance for evidence the secular tailwind of AI is still blowing strong. Based on the available evidence and using history as a guide, I predict that Nvidia will deliver record-breaking results and surpass expectations, sending its stock to new heights.
Is the stock worth the price?
Thanks to Nvidia’s superb results, there’s been a commensurate increase in its valuation. Analysts and investors alike have been scrambling to decide how best to value Nvidia stock, but we’re in unchartered territory here. Nvidia generated revenue of $61 billion in fiscal 2024 (ended Jan. 28), an increase of 126%. Growth of that magnitude is certainly deserving of a premium, but there’s no consensus regarding the size of said premium.
Nvidia is currently selling for 75 times earnings, but that number is about to see a dramatic reset after the company delivers its financial report, as new, higher profits are factored into the ratio. The chart clearly shows the stark decline in the wake of each of its three previous financial reports in November, February, and May, respectively.
While some investors might balk at paying in the neighborhood of 50 times earnings (represented by the dips in the stock chart), I would argue that’s a fair price to pay for a company delivering triple-digit growth and leading the fourth industrial revolution.
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 22, 2024
Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Prediction: Nvidia Will Deliver Record Results on Aug. 28, Which Will Supercharge the Stock was originally published by The Motley Fool
Chevron Continues to Take Steps to Capture This Potentially $4 Trillion Opportunity (But it Remains Well Behind Rival ExxonMobil)
Carbon dioxide emissions are a big problem for the environment. Oil and gas combustion is a key source of this climate-changing gas. Because of that, many energy companies are looking for ways to be part of the solution instead of only contributing to the problem.
That’s leading big oil giants Chevron (NYSE: CVX) and ExxonMobil (NYSE: XOM) to explore the potential of carbon capture and storage (CCS). They believe CCS will not only be a major part of the solution (according to the International Energy Agency, it’s nearly impossible for the world to reach net zero without it) but also a very lucrative business opportunity. Exxon believes CCS could grow into a $4 trillion global market by 2050.
Slowly building its CCS portfolio
Chevron has been working to build out its CCS capabilities. The oil giant recently won an assessment permit in offshore Western Australia to evaluate the potential of building a hub to store carbon dioxide emissions from third parties and its operated liquefied natural gas (LNG) assets in the region. The permit involves a joint venture between Chevron (70% interest) and Woodside Energy (30%).
Chevron has agreed to farm down 5% of its equity in the permit to Korea’s GS Caltex. The partners have unique assets, capabilities, and customer relationships to support a potential CCS development at this site.
This project could expand Chevron’s CCS operations in Australia, which includes its currently operating Gorgon CCS project. The platform has the potential to enable the oil company to lower the carbon intensity of its existing operations. It can also provide opportunities for customers to help reduce or offset some of their emissions.
Chevron has a bold goal to capture 25 million metric tons of carbon dioxide annually by the end of the decade. That’s equivalent to taking 5 million cars off the road each year. It’s working on several projects worldwide to achieve that goal, including the Bayou Bend CCS Hub in the U.S. (one of the largest in the country with the potential capacity to store more than 1 billion metric tons of carbon dioxide). However, other than Gorgon CCS, most of Chevron’s projects are very early in development.
A slightly different game plan
Chevron’s initial CCS focus is on reducing the emissions of its operations by building projects to capture those produced at its sites for storage at its sequestration hubs. Exxon is taking a slightly different approach. While it’s working on CCS developments to reduce its emissions, it’s also focusing on capturing and storing third-party emissions volumes.
For example, the company recently signed an agreement with CF Industries to transport and permanently store up to 500,000 metric tons of carbon dioxide per year from its complex in Yazoo City, Mississippi. That project will cut emissions from this site in half when it starts up in 2028.
It’s Exxon’s second commercial contract with CF Industries. It now has contracts to store up to 5.5 million tons of carbon dioxide annually for several customers. That’s equal to replacing 2 million gas-powered cars with electric vehicles (EVs), more than the total number of EVs sold in the country last year.
No other company has come close to the magnitude of commercial CCS contracts signed by Exxon. A big driver has been its nearly $5 billion acquisition of Denbury Resources last year, which bolstered its carbon transportation infrastructure capabilities.
Exxon believes its CCS business could generate billions of dollars in annual revenue in the next five years, with much greater potential in the coming decades. Further, this revenue would be more stable than its oil and gas earnings, which fluctuate with commodity prices. Because of that, it could put a firm and growing floor under its earnings.
Working to cash in on a potentially lucrative opportunity
CCS will be crucial in helping the world reduce carbon emissions. Oil giants Chevron and Exxon want to be at the forefront of this technology, leading both to invest heavily in its development.
While Exxon is farther along, especially in commercializing third-party volumes, Chevron continues to build out its global CCS portfolio in hopes of capturing a share of this potentially massive opportunity. Their success in developing commercial CCS projects could enable these oil giants to create a lot of value for their investors in the coming decades.
Should you invest $1,000 in ExxonMobil right now?
Before you buy stock in ExxonMobil, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and ExxonMobil wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 22, 2024
Matt DiLallo has positions in Chevron and Woodside Energy Group. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.
Chevron Continues to Take Steps to Capture This Potentially $4 Trillion Opportunity (But it Remains Well Behind Rival ExxonMobil) was originally published by The Motley Fool
The Ultimate Growth Stock to Buy With $500 Right Now
What makes the ultimate growth stock? Beyond high growth rates, I’d say it has to have long-term growth drivers, be on the cusp of or already demonstrating profitability, have some sort of hedging or resilience, and not be overvalued.
Sounds too good to be true? Check out Nu Holdings (NYSE: NU). Nu is a Brazil-based digital bank that offers a wide array of financial services in three Latin American countries, and it appeals to a broad base of customers through its low rates, easy-to-use platform, and modern technology. It has all this and more.
High growth rates
Quarterly growth rates have been incredibly high for Nu as it adds customers at a fast pace — and these customers are engaging at high rates. Nu added more than 5 million customers in the second quarter, zooming past 100 million for the first time, for a total of 104.5 million. Customers in its headquarters and main market of Brazil are still joining at a healthy clip despite more than half the adult population — 56% — already using the platform, and engagement rates are increasing as well, reaching 83.4% in the quarter.
Average revenue per active user (ARPAC) increased 30% year over year, and it keeps growing sequentially as well on a currency-neutral basis.
Long-term growth drivers
The bank is still capturing market share in Brazil, and it’s growing even faster in its newer markets of Mexico and Colombia. Mexico added 1.2 million customers in the second quarter for a total of 7.8 million, while Colombia surpassed 1 million in the quarter.
It still has limited services in the countries, and it only recently launched its high-interest savings account that’s attracting new membership. Growth in the Mexico business was the main driver of deposit increases in the second quarter, with deposits there tripling over the past two quarters since launching the savings account. Management says these two markets are still in their “investment phases.”
As Nu picks up more accounts and launches new services, it’s leading to higher engagement and more cross-sells and upsells. That should keep growth rates robust for the foreseeable future.
Near or demonstrating profitability
All of that could still pose risk if Nu wasn’t turning sales dollars into profits. But the company has been reporting strong profits for several consecutive quarters, driven by a stable cost to acquire and a low cost to serve that it says is 85% lower than incumbents. Increases in deposits are also driving higher net interest income (NII) and margin (NIM) in the credit business. NII increased 77% year over year in the second quarter, while NIM rose from 13% to 14%. Total net income increased 134% to $487 million currency neutral.
Nu is demonstrating this kind of profitability even though the Mexico and Colombia businesses remain in the red. It’s important for a company that can grow long term to have that kind of capital available to grow without worrying about overall profitability, which is likely one of the reasons Warren Buffett likes this stock.
Hedging its bets
Buffett has talked about varied earnings streams as a feature he looks for in a stock, and Nu is expanding its platform to protect its business. It has diversified to cover bank accounts, lending products, and other financial services.
The high growth in deposits, which is what’s driving growth in its newer markets, gives it cash to drive its lending business, and it has taken on some extra risk and defaults, given its swelling and healthy credit portfolio. The total portfolio increased 49% year over year in the second quarter, and loan originations increased 78%.
Reasonable valuation
Nu stock trades at a forward price-to-earnings ratio of 23, which looks like a bargain in relation to its performance and opportunities. It certainly looks reasonably valued compared with other high-growth stocks.
Too good to be true?
So is Nu a no-brainer buy? There’s still some risk because it operates in a region where there’s high economic volatility, and it’s still a fairly young company. That’s mitigated by its strong risk management and stability thus far.
It’s also a Buffett stock. That’s not proof of anything, but since Buffett generally avoids riskier stocks, it gives investors a flavor for the level of risk with Nu stock. I’d say it’s minimal at this point.
If you have $500 to spend after paying down debt and saving for an emergency, you can get a fair amount of Nu stock while it’s still below $15. You’ll thank yourself later.
Should you invest $1,000 in Nu Holdings right now?
Before you buy stock in Nu Holdings, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nu Holdings wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 22, 2024
Jennifer Saibil has positions in Nu Holdings. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
The Ultimate Growth Stock to Buy With $500 Right Now was originally published by The Motley Fool
Morgan Stanley Predicts up to 220% Jump for These 2 ‘Strong Buy’ Stocks
Despite a rocky start in August, investor sentiment has remained resilient, with the S&P 500 rallying nearly 9% since its August 5th low.
This upward momentum has been driven by a series of positive economic data releases, including better-than-expected initial jobless claims and strong retail sales figures.
Wall Street also reacted favorably to Federal Reserve Chair Jerome Powell’s comments on Friday, signaling that the Fed is prepared to cut interest rates as the labor market softens and inflation approaches the Fed’s 2% annual target.
With this bullish surge in play, the key question is: how can you spot the next hot stock in this environment? One effective strategy is to focus on high-upside stocks endorsed by analysts from top-tier investment banks like Morgan Stanley. These experts bring valuable experience and in-depth knowledge to the table.
In fact, the analysts at Morgan Stanley have highlighted two stocks they believe are poised for significant gains in the coming year – with potential upside as high as 220% in one case. If that’s not enticing enough, according to the TipRanks database, both stocks are also rated as Strong Buys by the analyst consensus. Let’s see what’s driving the unanimous praise from analysts.
COMPASS Pathways (CMPS)
The first Morgan Stanley pick we’ll look at is COMPASS Pathways, a biopharma firm developing innovative treatments for hard-to-treat mental health disorders by leveraging the psychedelic effect of psilocybin. As the active compound in ‘magic mushrooms,’ psilocybin has garnered attention in psychiatric circles for its potential to effectively treat a wide range of mental health conditions.
COMPASS has developed a synthetic psilocybin formulation, known as COMP360, designed to be used in conjunction with psychological support and therapy. The treatment process involves an initial series of sessions where the patient and therapist build rapport, followed by controlled drug administration sessions where the patient receives psilocybin. During these sessions, the patient is closely monitored, and post-session discussions with the therapist help process the experience.
Currently, COMPASS’s most advanced trial program focuses on using psilocybin to treat patients with treatment-resistant depression (TRD), a severe mental health condition that significantly diminishes quality of life. The company is investigating the COMP360 treatment in two Phase 3 clinical trials (COMP005 and COMP006); COMP005 is evaluating the effects of a single-dose monotherapy in 255 participants, with top-line data expected by Q4 2024 or early 2025. Meanwhile, COMP006 is focusing on fixed repeat dose monotherapy in a larger cohort of 568 participants, with top-line results anticipated by mid-2025.
In addition to this late-stage study on TRD, the company’s COMP360 treatment has also been the subject of an open-label Phase 2 study in the treatment of PTSD. The study involved 22 patients, focused on safety and tolerability, and positive results were announced during the second quarter of this year. Building on these results, the company is now evaluating the best approach to advancing its PTSD treatment.
Morgan Stanley analyst Vikram Purohit, who covers the stock, sees CMPS as presenting a compelling risk-reward opportunity. He highlights the company’s leading clinical program, stating, “Progress continues with the PhIII program for COMP360 in TRD, where the next fundamental milestone is top-line data from the PhIII COMP005 trial in 4Q24… The PhII data for COMP360 in TRD is competitive, KOL feedback on the data and uptake potential for COMP360 is positive, and the commercial opportunity in TRD is well-defined.”
“Based on the data generated & stage of development for COMP360, CMPS appears significantly undervalued and we find the risk/reward skewed positive into data catalysts in 2024/2025 that we believe could drive significant appreciation in shares,” the analyst added.
To this end, Purohit rates CMPS shares an Overweight (i.e. Buy), and his $23 price target points toward a robust one-year upside potential of ~220%. (To watch Purohit’s track record, click here)
The broader analyst community shares Purohit’s optimism. Based solely on Buy recommendations – 7 in total – analysts collectively rate CMPS as a Strong Buy. With the stock currently trading at $7.19, the average price target of $40.57 implies an impressive upside potential of 464% over the next year. (See CMPS stock forecast)
Rocket Pharmaceuticals (RCKT)
Next up on Morgan Stanley’s list is Rocket Pharmaceuticals, a biotech company at the forefront of gene therapy. Rocket employs adeno-associated (AAV) and lentiviral (LVV) vectors to pioneer treatments for complex, rare hematologic and cardiovascular conditions, areas with significant unmet medical needs and limited treatment options.
Rocket’s most advanced programs focus on hematology. The company is advancing LV RP-L102, a drug candidate designed to treat Fanconi anemia, and Kresladi, a potential treatment for LAD-1.
On the Fanconi track, Rocket recently released positive data from its Phase 1/2 study and confirmed that regulatory filings remain on schedule.
Conversely, the company faced a setback in June when the FDA issued a Complete Response Letter for the Biologics License Application for Kresladi, requesting additional CMC information to complete its review. Rocket’s management has assured that the review process is ongoing and that they are actively collaborating with senior leaders and reviewers at the FDA’s Center for Biologics Evaluation and Research to resolve the issue.
On the cardiovascular front, Rocket’s research programs are progressing well. Among the most prominent candidates are PR-A501 and RP-A601. PR-A501, a potential treatment for Danon disease, is currently in a Phase 2 pivotal study, while RP-A601, targeting PKP2 arrhythmogenic cardiomyopathy, is enrolling patients for a Phase 1 study.
Rocket’s large and varied pipeline has caught the attention of Morgan Stanley analyst Michael Ulz, who is particularly impressed by the cardiovascular advancements.
“Our Overweight rating is based on Rocket’s position as a leader in the gene therapy field combined with a robust pipeline and experienced management team. We view RP-A501 (AAV) in Danon disease as a key driver with blockbuster potential and see broader potential from the cardiovascular pipeline (PKP2 and BAG3). While we expect focus on the cardiovascular pipeline, we believe the more advanced hematology (LV) franchise provides near term opportunity,” Ulz opined.
Ulz complements his Overweight (i.e. Buy) rating on RCKT with a $45 price target, implying a 142% gain for the stock in the coming 12 months. (To watch Ulz’s track record, click here)
No one is arguing with that take on Wall Street. The stock’s Strong Buy consensus rating is based on Buy recommendations only – 8, in total. The forecast calls for one-year gains of ~147%, considering the average price target stands at $45.86. (See RCKT stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
2 Game-Changing Artificial Intelligence (AI) Stocks to Buy Now That Could Help Set You Up for Life
The artificial intelligence (AI) boom will create fortunes for savvy investors. Here are two innovative AI leaders that are set to deliver wealth-building returns to their shareholders.
AI stock to buy No. 1: SoundHound AI
SoundHound AI‘s (NASDAQ: SOUN) state-of-the-art voice technology can interpret speech in a similar manner to the human brain. Its conversational AI provides a faster and more accurate experience than competing platforms — at a time when companies are rushing to harness the power of this game-changing tech.
Restaurants use SoundHound AI’s tools to create custom voice assistants. Its smart answering and ordering solutions eliminate customer wait times by processing multiple orders simultaneously. The tech can also boost profitability by enabling a restaurant to process more orders and reduce labor costs. Customers include Papa John’s, Casey’s, and Chipotle.
Automotive titans are also racing to adopt SoundHound’s technology. The voice AI pioneer’s speech recognition software integrates with generative AI models like OpenAI’s ChatGPT. It provides access to a vast amount of real-time information like navigation, weather, and maintenance updates conveniently delivered via hands-free controls. Leading automakers, including Mercedes Benz, Stellantis, and Honda, count among SoundHound’s growing list of clients.
SoundHound’s sales, in turn, are expanding at a torrid clip. The company’s revenue jumped by 54% year over year to $13.5 million in the second quarter.
Profitability should come as the small-cap company continues to scale its operations. SoundHound’s recent move to acquire enterprise AI software provider Amelia ought to help in this regard. Management expects the deal to boost SoundHound’s earnings by the second half of 2025.
AI stock to buy No. 2: Advanced Micro Devices
Nvidia‘s (NASDAQ: NVDA) AI chips are selling like hotcakes. So much so that the semiconductor designer has struggled to meet the booming demand for this increasingly crucial technology. These shortfalls have kept prices elevated and delayed the AI plans of many companies. Chip buyers clearly want more supply. They’re eager to embrace a new competitor to Nvidia — and Advanced Micro Devices (NASDAQ: AMD) is up to the task.
AMD’s data center revenue soared 115% to $2.8 billion in the second quarter. These gains were fueled by strong sales of the company’s new AI accelerators, which help to quicken machine learning workloads.
CEO Lisa Su sees revenue for AMD’s new AI chips surging to more than $4.5 billion in 2024. Yet the chipmaker is just scratching the surface of its long-term market opportunity. Su predicts that global AI chip sales will grow to a whopping $400 billion by 2027.
AMD could capture 20% of this rapidly expanding market by 2028, according to analysts at Piper Sandler. Large chip buyers, such as Microsoft and Meta Platforms, are reportedly planning to integrate AMD’s AI accelerators into their cloud computing operations.
Like SoundHound, AMD is using acquisitions to strengthen its competitive position and accelerate its expansion. The tech leader completed its $665 million purchase of Silo AI on Aug. 12. Europe’s largest private AI lab comes with a team of experienced scientists and engineers who will work to bolster AMD’s model and software development efforts.
Just days later, AMD struck a deal to acquire ZT Systems for $4.9 billion. The AI infrastructure provider should fortify AMD’s ability to design and deploy large-scale cloud computing systems for its customers.
Should you invest $1,000 in Advanced Micro Devices right now?
Before you buy stock in Advanced Micro Devices, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Advanced Micro Devices wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 22, 2024
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Chipotle Mexican Grill, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Casey’s General Stores and Stellantis and recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
2 Game-Changing Artificial Intelligence (AI) Stocks to Buy Now That Could Help Set You Up for Life was originally published by The Motley Fool