4 Wall Street Darling Gold Stocks Worth Buying
Gold is widely considered a safe-haven asset, given its ability to remain a reliable store of value. Despite a relatively slow start to the new year, after hitting a record annual price in 2023, analysts expect the precious metal to achieve another record in 2024, driven by enhanced geopolitical instability, hopes of lower interest rates, and monetary uncertainty.
Hence, fundamentally sound gold stocks Alamos Gold Inc. (AGI), Centerra Gold Inc. (CGAU), Centamin plc (CELTF), and Dundee Precious Metals Inc. (DPMLF) could be worth buying now for substantial gains.
Gold prices soared significantly in the last few months of 2023, fueled by increased central bank purchasing and rising investor concerns over the escalating geopolitical tensions due to the Israel-Hamas and Russia-Ukraine conflicts. Further, a declining U.S. dollar and expectations of rate cuts by the Fed drove gold prices, which hit a record high of $2,135.39/oz in December.
After increasing the Fed’s benchmark short-term rate to a 22-year high of 5.25%-5.5%, policymakers on the Federal Open Market Committee (FOMC) indicated at least three rate cuts this year, thanks to a slower pace of inflation. With gold prices hovering around $2,000/oz, another bullish run is anticipated for the yellow metal as interest rates begin to fall.
“Across all metals, we have the highest conviction on a bullish medium-term forecast for both gold and silver over the course of 2024 and into the first half of 2025, though timing an entry will continue to be critical,” said Gregory Shearer, Head of Base and Precious Metals Strategy at J.P. Morgan.
Shearer added, “At the moment, gold still appears quite rich relative to underlying rates and foreign exchange (FX) fundamentals, and still looks vulnerable to another modest retreat in the near-term, as Fed rate cut expectations are now running earlier than our forecasts.”
In addition to imminent interest rate cuts and increased geopolitical instability, central banks were a primary driver of gold prices last year and will continue to be in 2024. J.P Morgan Research estimates global purchases by the central bank for the year to hit about 950 tonnes, with China being a significant buyer.
According to J.P. Morgan, gold prices are expected to peak at $2,300/oz in 2025. This forecast assumes the Fed will deliver 125 basis points of rate cuts over the second half of 2024, pushing bullion prices to new nominal highs.
Moreover, Joni Tevas, precious metals strategist at UBS, expects gold prices to hit $2200/oz by the end of 2024. “We are expecting gold to be pushed higher by a Fed easing. Also this comes with a weaker dollar,” Teves said.
Investors’ interest in gold stocks is evident from the SPDR Gold Shares ETF’s (GLD) 8.5% gains over the past year.
In light of these encouraging trends, let’s look at the fundamentals of the four best Miners – Gold stocks, beginning with number 4.
Stock #4: Alamos Gold Inc. (AGI)
Based in Toronto, Canada, AGI engages in the acquisition, development, and extraction of precious metals. It mainly explores for gold and silver deposits. The company holds 100% interest in the Young-Davidson mine and Island Gold mine located in Ontario, Canada; the Mulatos mine situated in Sonora, Mexico; and the Lynn Lake project located in Manitoba, Canada.
On January 15, 2024, AGI entered a definitive agreement under which Alamos will acquire all the issued and outstanding shares of Orford Mining Corporation (ORM). This acquisition will consolidate Alamos’ existing ownership of Orford shares, through which the company will add to the highly prospective Qiqavik Gold Project, situated in Quebec, Canada.
In addition, Alamos will acquire interests in various exploration stage critical mineral and gold projects in Quebec, including West Raglan, the Joutel Properties, and Nunavik Lithium. This strategic acquisition of Orford aligns with AGI’s strategy of building out a pipeline of high-quality, long-term projects to complement its near-term organic growth projects in Canada.
On November 9, 2023, AGI announced outstanding results from its near-mine and regional exploration drilling program at Island Gold. The underground exploration drilling continues to extend high-grade gold mineralization across the Island Gold Deposit in the E1E and C-Zones and adjacent wall and footwall structures close to existing underground infrastructure.
Alamos finished 2023 with another solid quarter, achieving the top end of its increased annual guidance (515,000-530,000) with a record production of 529,300 ounces of gold. This represents a 15% increase from 2022, driven by low-cost growth from La Yaqui Grande. It sold 526,257 ounces of gold at an average realized price of $1,944 per ounce for record revenues of $1 billion.
AGI ended the year 2023 with nearly $225 million of cash and cash equivalents, an increase from $130 million at the end of 2022. Also, the company remains debt-free.
For the third quarter that ended September 30, 2023, AGI’s operating revenues increased 19.9% year-over-year to $256.20 million. Its earnings from operations grew 176.3% from the year-ago value to $82.60 million. The company’s adjusted net earnings and adjusted EPS rose 102.6% and 100% year-over-year to $54.50 million and $0.14, respectively.
Analysts expect AGI’s revenue for the fourth quarter (ended December 2023) to grow 12.8% year-over-year to $261.48 million. The company’s EPS for the same period is expected to increase 33.8% year-over-year to $0.12. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters, which is impressive.
AGI’s stock has gained 8.1% over the past six months and 18.4% over the past year to close the last trading session at $12.31.
AGI’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
AGI has a B grade for Sentiment, Growth, and Quality. It is ranked #11 out of 41 stocks within the Miners – Gold industry.
In addition to the POWR Ratings I’ve highlighted, you can access AGI’s Value, Momentum, and Stability ratings here.
Stock #3: Centerra Gold Inc. (CGAU)
Headquartered in Toronto, Canada, CGAU is a gold mining company that engages in the acquisition, exploration, development, and operation of gold and copper properties. It explores gold, copper, and molybdenum deposits. Its flagship projects include the 100% owned Mount Milligan gold-copper mine in British Columbia, Canada, and the Öksüt Gold Mine located in Turkey.
On November 3, 2023, CGAU announced that the Toronto Stock Exchange (TSX) acceptance of renewed normal course issuer bid (NCIB) to purchase for cancellation up to an aggregate of 18,293,896 common shares for the period beginning November 7, 2023, and ending on November 6, 2024.
These shares represent about 8.48% of Centerra’s total issued and outstanding common shares, or 10% of the public float. The company believes that the NCIB will provide it with a flexible tool to deploy a portion of its cash balance in accordance with its capital allocation framework.
On October 31, CGAU announced a quarterly dividend payment of C$0.07 ($0.05) per common share – nearly C$15 million ($11.10 million). The dividend was paid on November 29, 2023, to shareholders of record as of November 15, 2023. Its annual dividend of $0.20 translates to a yield of 3.80% at the prevailing share price. Its four-year average dividend yield is 2.82%.
CGAU’s revenue increased 92.1% year-over-year to $343.89 million in the third quarter that ended September 30, 2023. Its earnings from mine operations rose 251.5% year-over-year to $114.60 million. Its adjusted net earnings were $44.40 million, or $0.20 per share, compared to an adjusted net loss of $15.90 million, or $0.06 per share, in the prior year’s quarter, respectively.
For the fourth quarter that ended December 2023, Street expects CGAU’s revenue to increase 66.7% year-over-year to $347.13 million. Further, the company’s revenue and EPS for the fiscal year 2024 are estimated to grow 2.3% and 1,772.8% from the prior year to $1.13 billion and $0.52, respectively.
Additionally, CGAU has surpassed the consensus revenue estimates in each of the trailing four quarters.
CGAU’s shares have declined 6% over the past month to close the last trading session at $5.26.
CGAU’s POWR Ratings reflect its promising prospects. The stock has an overall grade of B, equating to a Buy in our proprietary rating system.
CGAU has an A grade for Growth and a B for Value and Quality. It is ranked #6 of 41 stocks within the Miners – Gold industry.
To see the other ratings of CGAU for Sentiment, Momentum, and Stability, click here.
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