Is Energy Transfer (ET) the Next Big Dividend Winner?

Posted on by The INO.com Team

Leading midstream oil & gas company Energy Transfer LP (ET) has again gained traction among income-seeking investors for its high-yield dividend. The company's distribution yield currently tops 8%, which is well above the market’s 1.4% yield.

Moreover, the energy company has been a staple in a Congress member's portfolio for several years. In 2023, Representative Mark Green of Tennessee emerged as the second-best stock trader in Congress, boasting an impressive 122.2% return on investment.

Now, let's take a closer look at the company’s business operations, fundamentals, and how it supports its attractive distribution.

Recent Strategic Expansion Initiatives

Operating a vast network of approximately 125,000 miles of pipelines for the transportation of crude oil, natural gas, and natural gas liquids (NGLs), Energy Transfer demonstrates its robust and resilient business operations.

On March 27, 2024, Texas Rangers announced an extended partnership with ET, marking a multi-year agreement where the energy company will serve as the Rangers' official jersey patch partner. This move signifies a significant expansion of the company's brand visibility and community involvement.

ET co-CEO Mackie McCrea remarked, “Expanding our partnership to include the jersey patch creates an opportunity for us to show our support for the team while aligning our brand with Rangers fans throughout the Metroplex and across the country.”

On February 23, ET and Sunoco LP (SUN) joined forces to sponsor Sauber Motorsport’s Stake F1 Team KICK Sauber, marking their inaugural marketing partnership. The two-year agreement, starting from the 2024 season, grants sponsorship rights for three Formula 1 Grand Prix races in the U.S.

Also, in November 2023, Energy Transfer completed its previously announced merger with Crestwood Equity Partners LP, and integration of the combined operations is ongoing. The merger is expected to generate $80 million of annual cost synergies by 2026, with $65 million in 2024, before additional anticipated benefits from financial and commercial synergies.

What’s in Store for Income-oriented Investors?

ET is highly committed to returning value to shareholders via attractive dividends. On April 24, the company announced a quarterly cash distribution of $0.3175 per common unit ($1.27 on an annualized basis) for the first quarter, to be paid on May 20, 2024. The distribution per unit represents a 3.3% increase over the year-ago quarter.

Further, the company expects to grow its distribution by 3% to 5% annually. Energy Transfer’s current dividend translates to an 8% yield, while its four-year average dividend yield is 9.8%. Meanwhile, ET has raised its dividend payouts at a CAGR of 10.8% over the past three years.

Solid Fourth-Quarter 2023 Results and Upbeat 2024 Outlook

For the fourth quarter that ended December 31, 2023, ET’s revenues rose marginally year-over-year to $20.53 billion. Its operating income grew 19.9% year-over-year to $2.17 billion. Net income attributable to partners and net income per common unit came in at $1.33 billion and $0.37, up 14.9% and 8.8% from the prior-year quarter, respectively.

Furthermore, the energy company’s adjusted EBITDA increased 4.8% year-over-year to $3.60 billion. Also, its distributable cash flow attributable to partners amounted to $2.03 billion compared to $1.91 billion for the same period last year.

During the fourth quarter, Energy Transfer achieved significant milestones with the addition of new growth projects and acquisitions. The company's assets hit new records, with NGL fractionation volumes increasing by 16%. NGL transportation volumes also saw a notable surge of 10%. Additionally, NGL exports were up more than 13%, showcasing the company's expanding market reach.

Further, interstate natural gas transportation volumes witnessed a 5% growth, while midstream gathered volumes rose by the same margin. Crude oil transportation and terminal volumes were up 39% and 16%, respectively.

For the fiscal year 2024, ET anticipates its adjusted EBITDA to fall between $14.5 billion and $14.8 billion. The midpoint of this range indicates a 7% increase from last year’s adjusted EBITDA. Growth capital expenditures are estimated to range from $2.4 billion to $2.6 billion, including nearly $300 million of deferred spending from the previous 2023 capital guidance.

Energy Transfer will unveil its first-quarter results on May 8. For the quarter that ended March 2024, analysts expect the company’s EPS and revenue to increase 19% and 10.4% year-over-year to $0.38 and $20.97 billion, respectively. In addition, ET’s EPS and revenue for the fiscal year 2024 are expected to grow 44.1% and 9.1% from the prior year to $1.57 and $85.70 billion, respectively.

Bottom Line

ET’s business continues to thrive, propelled by consistent demand across its network and strategic acquisitions and partnerships. It benefits from a portfolio of assets with exceptional product and geographic diversity. Moreover, the energy company reported impressive fourth-quarter results, primarily driven by increased volumes across all core segments and the positive impact of its recent acquisition of Enable Midstream.

Moreover, ET announced an increase in quarterly cash dividend to $0.3175 per common unit for the first quarter of 2024. The company’s annual dividend reflects a lucrative yield of 8%. Energy Transfer targets a 3% to 5% annual distribution growth rate. The dividend increase reflects ET’s confidence in its financial health and growth prospects.

Further, the stock is modestly undervalued. ET’s forward non-GAAP price-to-earnings ratio of 10.17 is 7.5% lower than the industry average of 11. Also, its forward Price/Sales multiple of 0.62 compares to the industry average of 1.49.

Regarding price performance, the midstream giant’s shares have gained nearly 15% year-to-date and more than 25.1% over the past year. On top of it, RBC Capital analyst Elvira Scotto recently maintained a Buy rating on ET and set a price target of $19. Also, Mizuho Securities reiterated a Buy rating on the stock with a $19 price target.

Given ET’s promising expansion efforts, solid financial performance, and attractive dividend yield, we believe that this stock holds the potential to become the next big dividend winner. Hence, it could be an ideal buy for those principally focused on income.

Bank of America (BAC) Payout Potential for Income Investors

Posted on by The INO.com Team

Headquartered in Charlotte, North Carolina, Bank of America Corporation (BAC), the financial juggernaut boasting $3.20 trillion in assets, has been a boon for investors lately. Over the past six months, shares of the mega-bank have delivered returns of 50.2%. Impressive, isn’t it?

Moreover, BAC now ranks as the second-largest holding in Berkshire Hathaway's (BRK.A) (BRK.B) portfolio, with well-known investor CEO Warren Buffett showing confidence in the bank’s long-term success. Berkshire owns around 1.03 billion shares in Bank of America, representing a 13.1% stake as of December 31, 2023.

Warren Buffett's knack for investing in profitable ventures has made Berkshire a top conglomerate. Berkshire's investment in BAC is driven by factors including the bank's robust financial position, diversification of financial services, and growth potential. Buffett, known for seeking companies with solid fundamentals and competitive advantages, sees Bank of America meeting his standards. So, does this signal a bullish outlook on the bank’s prospects?

Here's a closer look at whether BAC holds promise for investors seeking to emulate Buffett's investment philosophy.

How Did the Bank Perform in Q1?

Bank of America’s top line in the fiscal 2024 first-quarter results revealed a marginal year-over-year decline, reaching $25.82 billion due to the lower net interest income (NII) generated across its business segments. NII decreased by 3% year-over-year to $14.03 billion, with higher deposit costs outweighing increased asset yields and modest loan growth.

Despite the drop, the company delivered better-than-expected NII performance, which is $100 million higher than the last quarter. BofA had predicted a decrease of $100 million to $200 million from the fourth quarter of 2023 to the first quarter of 2024. Moreover, BAC’s Global Wealth and Investment Management segment reported a record revenue of $5.60 billion, up 5% year-over-year.

In addition, BAC’s net income applicable to common shareholders fell by 19.8% from the prior year’s quarter to $6.14 billion. Its EPS came in at $0.76, representing a decline of 19.2% year-over-year.

Compared to the previous year’s period, the company’s provision for credit losses rose by 41.7% to $1.32 billion. Also, its total net charge-offs increased 85.6% year-over-year. The net charge-offs as a percentage of average loans and leases outstanding stood at 0.58%, compared to 0.32% in the prior-year quarter.

On the other hand, the company’s CET1 ratio came in at 11.8%, compared to 11.4% in the prior-year quarter. Also, its total loans and leases rose 0.2% year-over-year to $1.05 trillion. As of March 31, 2024, Bank of America’s liquidity remained strong, with cash and cash equivalents at $313.40 million, albeit a decline of 5.9% from $333.07 billion as of December 31, 2023.

Brian Moynihan, BAC’s Chair and CEO, said, “We reported a strong quarter as our businesses performed well, adding clients and deepening relationships. We reached 36.9 million consumer checking accounts, with 21 consecutive quarters of net checking account growth. Our Wealth Management team generated record revenue, with record client balances, and investment banking rebounded.”

“Continued strong earnings and strong expense management both position our company to continue to drive our market leading positions across our businesses,” Moynihan added.

What’s Ahead?

Street expects BAC to generate a revenue of $25.31 billion for the second quarter (ending June 2024), indicating a slight increase compared to the same period last year. The company’s earnings per share is expected to stand at $0.81 for the ongoing quarter.

For the fiscal year ending December 2024, analysts anticipate a revenue surge of 3.4% year-over-year, reaching $101.91 billion. They forecast that earnings per share will reach $3.23, up 4.7% year-over-year. Further, the company’s revenue and EPS for the fiscal year 2025 are expected to grow 2.5% and 8.7% year-over-year to $104.49 billion and $3.51, respectively.

Additionally, the company has comfortably surpassed consensus revenue estimates in three of the trailing four quarters, so there is a low likelihood of another miss in the upcoming period.

Dividend Sustainability Makes It Attractive for Income Investors

Thanks to its robust capital strength, with a common equity Tier 1 capital of $197 billion (exceeding regulatory requirements by $31 billion), the bank was able to support clients and return $4.4 billion to shareholders in the first quarter through dividends and share repurchases.

BAC rewards shareholders a dividend of 2.5% (or $0.96 annually), significantly higher than the S&P 500's average of 1.4%. That means BAC shareholders get over 78% of the income generated by America’s leading stock index.

Moreover, BofA has a commendable track record of dividend increases, with compound annualized growth rates (CAGRs) of 9.3% over the past three years and 10.5% over the past five years. With a record of 10 years of consecutive dividend growth, the bank has shown a steady and reliable history of doing so.

The company has a payout ratio of 32.5%, demonstrating a prudent balance between rewarding shareholders and retaining earnings for future growth. While past performance does not indicate future results, the company's steadfast commitment to dividend growth suggests that the management is unlikely to break its streak in the near term.

Bottom Line

Despite the mixed financials, BAC's recent first-quarter report showcased the strength of its diversified business model. Notably, the bank saw a significant 35% increase in investment banking fee revenue, driven by a timely rebound in deal activity. Also, its sales and trading revenue experienced a notable resurgence, marking its most robust first-quarter performance in over a decade.

Moreover, the company’s dividend sustainability and growth prospects highlight its attractiveness for income-focused investors seeking reliable cash flow and capital appreciation.

According to Statista, the U.S. wealth management market is expected to expand at a CAGR of 7.9%, resulting in a market volume of $87.35 trillion by 2028. Meanwhile, the U.S. retail banking market is projected to hit $91.47 billion, growing at a CAGR of 4.3% during the forecast period (2024-2028).

Given the inflationary pressures, the Federal Reserve is unlikely to cut rates in June, meaning interest rates will remain higher for longer. While this may enable banks to charge higher loan rates, they may face increased deposit costs, potentially impacting their margins. Bolstered by an adjusted ROTCE of 13.88% and a CET1 ratio of 11.8%, we believe the company is well-equipped to thrive in a higher interest rate environment.

Looking at valuation, BAC’s forward non-GAAP P/E of 11.89x is 14.1% higher than the industry average of 10.42x. Likewise, in terms of forward Price/Sales, the stock is trading at 2.96x, 18.4% higher than the industry average of 2.50x.

So, while existing shareholders have reason to cheer, potential investors might wait for a better entry point in this stock.

Top China Stock Picks to Buy Amid Economic Boom

Posted on by The INO.com Team

China's economy surged beyond projections at the start of 2024, with the Gross Domestic Product (GDP) escalating by 5.3% in the first quarter, an increase from the previous quarter's 5.2%, as the National Bureau of Statistics reported. The world's second-largest economy embraced a familiar strategy: significant investment in its manufacturing domain to invigorate growth.

This included a spree of new factories, propelling global sales of solar panels, electric vehicles, and various other products. Industrial production saw a 6.1% leap in the first quarter compared to the previous year, driven by robust expansion in high-tech manufacturing.

Notably, the production of 3D printing equipment, electric vehicle charging stations, and electronic components surged by approximately 40% year-on-year. Moreover, last month, the manufacturing purchasing managers' index (PMI) expanded for the first time in six months, while the Caixin/S&P PMI reached its highest level in over a year, buoyed by increased overseas demand.

That said, China has established an annual growth target of approximately 5% for 2024. Additionally, authorities have implemented interest rate cuts to stimulate bank lending and expedited central government spending to bolster infrastructure investment.

Given this backdrop, investors can leverage the economy's solid momentum by considering buying fundamentally robust Chinese stocks poised to deliver substantial returns.

PDD Holdings Inc. (PDD)

PDD Holdings Inc. (PDD), the e-commerce operator behind Pinduoduo and Temu, has rocked both the Chinese and U.S. e-commerce sectors with outstanding earnings and upbeat long-term prospects. The company primarily focuses on bringing businesses and people into the digital economy. Its market capitalization stands at $164.93 billion.

For the fourth quarter that ended December 31, 2023, PDD’s total revenues increased 123.2% year-over-year to $12.52 billion. Its non-GAAP operating profit rose 146% from the year-ago value to $3.46 billion. Its non-GAAP net income attributable to ordinary shareholders and non-GAAP earnings per ADS were $3.59 billion and $2.40, up 110.4% and 71.7% year-over-year, respectively.

Furthermore, cash inflows from operating activities for the quarter came in at $5.20 billion, an increase of 38.9% from the prior year’s quarter, primarily due to the surge in net income. Such financial prowess solidifies the company’s position in the market and sets a high bar for competitors.

Lei Chen, co-CEO of PDD, hailed 2023 as a “pivotal chapter,” attributing Pinduoduo's resilience in a sluggish Chinese economy and Temu’s burgeoning popularity in the U.S. to the company's strategic prowess. As Pinduoduo's affordable offerings resonate with value-conscious consumers amid economic uncertainties, the company's trajectory is becoming even more compelling.

Looking ahead, analysts expect PDD’s revenue to increase 97.8% year-over-year to $10.54 billion for the first quarter ended March 2024, and its EPS is expected to grow 47.8% year-over-year to $1.45. Moreover, the company has an impressive earnings surprise history as it surpassed consensus revenue and EPS estimates in all four trailing quarters.

Furthermore, for the fiscal year 2024, Street expects PDD’s revenue and EPS to increase 49.4% and 30.9% from the prior year to $51.37 billion and $8.45, respectively.

Baidu, Inc. (BIDU)

Baidu, Inc. (BIDU), a Chinese tech company specializing in Internet-related services, products, and artificial intelligence (AI), recently unveiled an array of cutting-edge AI models and toolkits. These advancements democratize AI development, empowering individuals of all skill levels to create transformative applications, a move poised to elevate BIDU's standing in the AI arena significantly.

One standout is ERNIE, BIDU's flagship AI model, renowned for its versatility across various applications. ERNIE Bot, a conversational AI bot built on this framework, has swiftly garnered 200 million users since its launch in March 2023, handling a staggering 200 million daily queries.

Baidu Comate, another innovation powered by ERNIE, has catalyzed innovation by contributing to 27% of new code within BIDU, serving over 10,000 companies, with an impressive 46% adoption rate. Additionally, Qianfan, BIDU AI Cloud's FM platform, has enabled over 85,000 enterprises to develop 190,000 AI applications, showcasing BIDU's wide-reaching impact in the industry.

BIDU's financial performance mirrors these technological triumphs. In the fourth quarter of fiscal 2023, the company’s revenue grew 5.7% year-over-year to $4.92 billion. Its non-GAAP operating income surged by 8.9% from the year-ago value to $996 million, and its non-GAAP net income experienced a 44.4% year-over-year growth, reaching $1.09 billion.

Moreover, BIDU’s adjusted EBITDA showed significant improvement, increasing by 10% year-over-year to $1.28 billion.

Analysts foresee a promising growth trajectory for BIDU. Wall Street expects the company’s revenue to increase 6.3% year-over-year to $19.87 billion for the fiscal year ending in December 2024, accompanied by an estimated EPS of $10.74. Furthermore, BIDU surpassed consensus EPS estimates in all four trailing quarters, which is remarkable.

For the fiscal year 2025, the company’s revenue and EPS are anticipated to grow 7.9% and 10% year-over-year to $21.43 billion and $11.82, respectively. These optimistic projections underscore BIDU's unwavering commitment to innovation and its potential for sustained success in the dynamic landscape of AI technology.

Baozun Inc. (BZUN)

Baozun Inc. (BZUN), a premier brand e-commerce solution provider and digital commerce enabler, has fortified omnichannel capabilities and expanded core product categories through high-level engagements. Collaborating with brand partners and key marketplaces, the company has crafted effective go-to-market strategies, acquiring over 50 new brands in 2023.

Implementing a new store concept transitioning from large-scale to boutique formats, BZUN enhances brand DNA and fosters immersive brand experiences beyond mere commercial transactions. In-store pop-ups and campaigns are further amplifying social engagement, enriching consumer experiences.

In addition, in January, the company authorized a new share repurchase program, allowing the repurchase of up to $20 million worth of outstanding American depositary shares (ADSs) and Class A ordinary shares over the ensuing 12 months, starting January 24, 2024.

During the fiscal 2023 fourth-quarter earnings call, BZUN unveiled the inauguration of 10 new stores, including a flagship in Guangzhou, alongside expansions in Shantou, Shenzhen, and Beijing. Notably, square meter efficiency surged 50% for newly opened stores, with existing ones witnessing a remarkable 19% spike in same-store sales.

For the fourth quarter that ended December 31, 2023, BZUN reported an 8.9% year-over-year surge in total net revenues to $391.61 million, marking a significant turnaround from the previous year's loss. The company posted an adjusted operating profit for E-Commerce of $16.60 million for the quarter.

Mr. Vincent Qiu, BZUN’s Chairman and CEO, said, “In 2023, we started our transformation journey, expanding into three business divisions. Throughout the year, we solidified our leadership in the digital commerce industry, and further enhanced operational efficiency. I am grateful for the resilience and adaptability demonstrated by the Baozun team amid the ever-changing market environment.”

“Looking ahead to 2024, despite macro uncertainties, we remain committed to sustainably executing our plans with diligence and patience. The improved health of our business fundamentals gives us confidence to enhance value proposition to our brand partners,” he added.

For the fiscal year ending December 2024, Street expects BZUN’s revenue to increase 3.2% year-over-year to $1.26 billion. Similarly, the company’s revenue for the fiscal year 2025 is estimated to grow 6.9% from the previous year to $1.35 billion.

Bottom Line

While U.S. stocks may offer stability in tumultuous times, diversifying into international stocks can yield significant benefits, especially in terms of portfolio risk management and solid returns. Financial advisors often advocate for familiarity with American companies, yet venturing into global markets, particularly China, can broaden investment horizons and unlock new opportunities.

This is because China is poised to reclaim its global significance, as per Bloomberg's analysis of IMF forecasts. Projections suggest China's economic resurgence will surpass the combined growth of the G-7 nations. China is anticipated to lead with an estimated 21% contribution to global economic growth from now through 2029.

In comparison, the G-7 nations are expected to contribute approximately 20%, while the U.S. falls short with 12%, nearly half of China's projected growth. Remarkably, 75% of global growth will originate from only 20 countries, with China, India, the U.S., and Indonesia accounting for over half of this expansion.

Investors can capitalize on this dynamic economic landscape by exploring fundamentally strong Chinese stocks poised for substantial returns. Among these, PDD, with its meteoric rise in e-commerce, BIDU, leveraging cutting-edge AI innovations, and BZUN, a leading brand e-commerce solution provider, stand out.

These stocks’ impressive financial performances, strategic initiatives, and optimistic growth projections make them compelling investment options for investors seeking exposure to the thriving Chinese economy.

3 Marijuana Stocks to Watch During Shifting Legalization Policies

Posted on by The INO.com Team

In recent years, the legalization of marijuana has sparked considerable controversy. While some see it as a positive development due to its perceived medical advantages and economic potential, others are wary of associated health hazards, increased availability to minors, and the risk of addiction.

Marijuana legalization across states varies significantly, with lawmakers either fully approving its use, permitting it solely for medical purposes, or enforcing penalties, including prison sentences, for its possession.

Nevertheless, despite the mounting concerns surrounding the disadvantages associated with the legalization of marijuana, as of April 2024, 38 states have legalized marijuana for medical purposes, with 24 of them also permitting it for recreational use.

With the anticipation of more states amending their laws to favor decriminalization of the substance by next year, a substantial segment of the American population aged 21 and above will likely gain access to marijuana.

Moreover, several other countries, such as Canada, Germany, Mexico, South Africa, and Thailand, have legalized marijuana. That said, the legalization of marijuana can provide a favorable regulatory environment for cannabis companies mentioned below.

Curaleaf Holdings, Inc. (CURLF)

With a focus on offering high-quality cannabis products catering to diverse consumer preferences, Curaleaf Holdings, Inc. (CURLF) operates across 17 states and manages around 145 dispensaries and 21 cultivation sites.

The company emphasizes its presence in densely populated states such as Arizona, Florida, Illinois, Massachusetts, New Jersey, New York, and Pennsylvania. CURLF kicked off the year by engaging in several strategic acquisitions to expand its market presence and drive sales.

For instance, in February, CURLF’s European division announced its acquisition of Can4Med, a prominent pharmaceutical wholesaler specializing in cannabinoid medications in Poland. This strategic initiative represents a major milestone for both entities and highlights CURLF’s dedication to improving patient access to premium medical cannabis products throughout Europe.

Meanwhile, in March, CURLF agreed to acquire Northern Green Canada (NGC), a vertically integrated Canadian licensed cannabis producer. This acquisition represents another significant milestone in CURFL’s expansion strategy, particularly in Europe.

Furthermore, this acquisition enables CURLF to enhance its European margins and extend its global footprint across North America, Europe, and Australasia (Australia/New Zealand).

Besides, the company reported a modest 1.5% year-over-year increase in fourth-quarter net revenue, totaling $345.27 million. CURLF reported an adjusted gross profit of $160.40 million and an adjusted gross margin of 46%. Its adjusted EBITDA rose 24.5% from the prior year’s period to $83.01 million.

Looking ahead, analysts foresee a 1% year-over-year rise in the company’s fiscal 2024 first-quarter revenue and a 26.9% year-over-year rise in its earnings per share.

Green Thumb Industries Inc. (GTBIF)

Green Thumb Industries Inc. (GTBIF) is a national cannabis consumer goods company and retailer dedicated to promoting wellness through cannabis while contributing to local communities. The company also operates a growing network of retail cannabis stores called RISE.

GTBIF has 20 manufacturing facilities, 92 retail locations, and operations across 14 U.S. markets. With a market cap of roughly $2.94 billion, the stock has surged more than 73% over the past year.

During the fiscal 2023 fourth quarter, the company witnessed a 7.3% year-over-year topline growth, reaching $278.23 million. Its attributable net income came in at $3.22 million and $0.01 per share versus a net loss of $51.23 million and $0.22 per share in the same period last year, respectively.

While reflecting on the past year's performance, GTBIF’s Chairman and CEO Ben Kovler highlighted the company’s record revenue and an adjusted EBITDA of $91 million. Additionally, GTBIF generated $225 million in cash flow from operations for the full year while investing over $200 million in capital expenditures to drive future growth.

Ending the year with a robust balance sheet, including $162 million in cash, the company returned a staggering $65 million to shareholders through share buybacks and debt repurchases. Furthermore, the board approved an additional $50 million for the share repurchase program, bringing the total remaining repurchase ability to nearly $60 million.

Looking ahead to 2024 and beyond, Kovler expressed optimism, citing the company's industry-leading brands, momentum, talented team, expanding customer base, and financial flexibility as driving factors for continued success.

Wall Street analysts also appear bullish for GTBIF’s upcoming first-quarter results, predicting an 8.2% year-over-year rise in revenue and an 18.5% year-over-year surge in earnings per share.

Trulieve Cannabis Corp. (TCNNF)

With shares up roughly 102.6% year-to-date, Trulieve Cannabis Corp. (TCNNF) has emerged as a top-tier, vertically integrated cannabis company operating across multiple states in the U.S. Its strong market presence in Arizona, Florida, and Pennsylvania forms the backbone of its operations in the Northeast, Southeast, and Southwest regions.

However, the company’s final quarter of 2023 revealed a mixed picture. TCNNF’s revenue dropped 3.7% year-over-year to $287 million. It reported an adjusted net loss of $23 million and $0.12 per share, slightly improving from a net loss of $34 million and $0.18 per share in the prior-year quarter, respectively.

On the positive side, the company’s gross margin and adjusted EBITDA margin stood at 54% and 31% versus 53% and 28% in the year-ago quarter.

Despite the mixed performance, TCNNF’s CEO Kim Rivers highlighted that the company is optimally positioned to capitalize on upcoming growth catalysts buoyed by its robust cash generation and a clearly defined strategy,

For the fiscal year ending December 2023, analysts expect TCNNF’s revenue to grow 2.2% year-over-year to $1.15 billion. Similarly, the company’s revenue for the fiscal year 2025 is expected to grow 6.5% from the prior year to $1.23 billion.

Moreover, CEO Kim Rivers recently expressed gratitude for the Florida Supreme Court's affirmative ruling on the Smart & Safe Florida initiative, which has been placed on the 2024 General Election ballot. If passed, the initiative will allow adults over 21 to purchase cannabis products for personal use, a development that could potentially strengthen the company’s financial position.

Bottom Line

As marijuana legalization policies across the U.S. and worldwide undergo significant shifts, investors have a unique opportunity to capitalize on the growth potential of the cannabis industry. Amid expanding legalization efforts, leading weed companies CURLF, GTBIF, and TCNNF could experience robust growth in the upcoming quarters.

To that end, investors could keep a close eye on these cannabis stocks for potential gains.

Top AI Stocks to Buy Amidst Nvidia's Plunge

Posted on by The INO.com Team

AI stocks have surged considerably this year, fueled by remarkable growth and enthusiasm for this breakthrough technology, with NVIDIA Corporation (NVDA) reigning as the dominant force. Its stock soared over 50% year-to-date, propelled by robust earnings. However, recent sell-offs hint that gains were primarily sentiment-driven and vulnerable to market dynamics.

NVDA’s shares nosedived by more than 14% over the last five days, surpassing the NASDAQ Composite Index's nearly 5% drop and the Dow Jones Industrial Average Index's minor decline in the same period.

When stocks like NVDA and Super Micro Computer, Inc. (SMCI) experience monumental growth, even minor setbacks trigger profit-taking, leading to cascading sell-offs. A single adverse event can snowball into significant losses as investors rush to secure profits amid fears of a bubble burst, highlighting the fragility of market sentiment.

Investor concerns have mounted as SMCI plunged by up to 21% in the last five days, reflecting apprehension about its upcoming earnings report. Although the company scheduled the release for April 30, it refrained from preannouncing earnings, unlike in January for its second-quarter results.

Typically, companies preannounce earnings when results exceed Wall Street consensus estimates. The absence of such a preannouncement from SMCI has stirred concerns on Wall Street. Analysts fear the upcoming earnings report may not match the previous quarter's robustness and could fall short of expectations.

NVDA isn’t immune to broader market sentiment despite its size and buffering impact. NVIDIA's chips are integral to SMCI's server solutions, leading investors to correlate potential weaknesses in SMCI's earnings with NVDA. 

Additionally, NVIDIA’s elevated valuation exacerbates market sensitivity. In terms of forward non-GAAP P/E, the stock trades at 30.58x, 34.1% above the industry average of 22.80x. Furthermore, its forward EV/Sales of 16.68x is 520% higher than the industry average of 2.69x, and its forward Price/Sales of 16.81x compares to the industry average of 2.69x.

Considering these factors, investors might explore alternative AI stocks poised to outperform NVDA in the near future. Amid NVDA's decline, these stocks offer diversified opportunities to capitalize on the burgeoning AI industry's growth potential.

Microsoft Corporation (MSFT)

Microsoft Corporation (MSFT), a leading tech company, posted stellar results surpassing analysts’ expectations, marking another quarter of double-digit growth in top and bottom lines. For the fiscal 2024 second quarter that ended December 31, 2023, the company’s total revenue surged 17.6% year-over-year to $62.02 billion and surpassed the consensus estimate of $61.13 billion. It reported a 32.5% increase in operating income to $27.03 billion.

Further, MSFT’s EPS increased 33.2% year-over-year to $21.87 billion and $2.93. That compared to analysts’ estimate of $2.77. The solid financial performance underscores the effective execution by MSFT's sales teams and partners, driving significant market share gains.

In addition to financial success, MSFT expanded its technological capabilities during the quarter. It integrated support for OpenAI's latest models, including GPT-4 Turbo, GPT-4 with Vision, and Dall-E 3, demonstrating its commitment to innovation and staying at the forefront of AI technology.

Furthermore, MSFT secured strategic partnerships and investments, enhancing its position in key markets. The company announced a $1.5 billion investment in G42, a leading UAE-based AI technology holding company, strengthening collaboration on AI initiatives and skilling programs globally.

Moreover, MSFT deepened its collaboration with Cloud Software Group Inc. through an eight-year strategic partnership agreement. This collaboration will drive cloud and AI solutions innovation, leveraging Microsoft Azure as the preferred cloud platform.

Looking ahead, analysts expect MSFT’s revenue to increase 15.3% year-over-year to $244.34 billion for the fiscal year ending June 2024. Its EPS for the current year is expected to grow 19.3% from the previous year to $11.70. For the fiscal year 2025, the consensus revenue and EPS estimates of $279.25 billion and $13.33 indicate increases of 14.3% and 13.9%, respectively.

Advanced Micro Devices, Inc. (AMD)

Advanced Micro Devices, Inc. (AMD) has spearheaded innovation in high-performance computing, graphics, and visualization technologies for over half a century. The company's recent enthusiasm revolves around the general availability of AMD Instinct MI300X accelerators, boasting industry-leading memory bandwidth performance for generative AI.

AMD has made significant strides in expanding its AI software ecosystem as well. The company has unveiled the latest version of its open-source ROCm™ 6 software stack optimized for generative AI. AI ecosystem leaders such as Databricks, Essential AI, Lamini, and OpenAI leverage AMD Instinct accelerators to provide differentiated AI solutions.

The company has also announced the AMD Ryzen 8040 Series mobile processors, featuring an integrated neural processing unit (NPU) on select models for AI. In 2022, AMD pioneered the introduction of an x86 processor with an on-chip NPU with the AMD Ryzen 7040 series mobile processors.

Furthermore, the company unveiled the AMD Ryzen 8000G Series desktop processors at CES 2024, the industry's first desktop PC processors with a dedicated AI NPU. At Microsoft Ignite, AMD and MSFT showcased how AMD Instinct MI300X accelerators, AMD EPYC CPUs, and AMD Ryzen CPUs with AI engines enable new services and compute capabilities across various domains.

Such innovative product launches have propelled AMD's financial performance. In the fourth quarter of fiscal 2023, AMD's non-GAAP revenue increased 10.2% year-over-year to $6.17 billion. Its non-GAAP gross profit grew 9.6% from the year-ago value to $3.14 billion. Also, the company's non-GAAP net income and EPS rose 12.2% and 11.6% from the prior year's period to $1.25 billion and $0.77, respectively.

Looking ahead, for the fiscal year ending December 2024, Street anticipates AMD’s revenue to increase 13.4% year-over-year to $25.72 billion, with its EPS expected to reach $3.60, marking a 35.7% rise from the previous year. These optimistic analysts’ projections underscore AMD's position as a leader in driving innovation in the AI computing landscape.

ServiceNow, Inc. (NOW)

ServiceNow, Inc. (NOW) excels in cloud-based platforms revolutionizing digital enterprise operations. Its AI-driven solutions empower businesses to streamline services efficiently, commanding a significant market presence. With more than 8,100 clients, including 85% of Fortune 500 companies, NOW's impact is profound.

In the fourth quarter of fiscal 2023, NOW showcased exceptional performance, reporting a remarkable 27% growth in subscription revenue and closing 70 deals exceeding $1 million. Moreover, platform workflows surged by an impressive 40%, underscoring its efficacy in enhancing operational efficiency and reducing costs.

The company’s fourth-quarter revenue increased 25.6% year-over-year to $2.44 billion, with non-GAAP income from operations seeing a 31.8% uptick from the year-ago value to $717 million. Additionally, its non-GAAP net income and net income per share came in at $643 million and $3.11, up 38.6% and 36.4%, respectively, from the prior year's quarter.

Moreover, NOW is forging strategic partnerships to integrate advanced analytics and AI capabilities to deliver tailored solutions. Strategic Collaborations with DXC and Amazon Web Services exemplify its commitment to innovation, ensuring industry-specific, AI-powered applications.

By expanding its alliance with EY organization and Visa Inc. (V), NOW is poised to revolutionize AI compliance, governance, and payment services. The acquisition of UltimateSuite further strengthens its automation and AI capabilities, driving operational efficiencies.

With continued generative AI advancements, NOW anticipates a promising 25% revenue growth in 2024, offering stability and long-term growth potential. Analysts predict the company’s revenue will grow 21.4% year-over-year to $10.89 billion for the fiscal year ending December 2024, with its EPS expected to total $13.09, marking a significant 21.5% rise year-over-year.

UiPath Inc. (PATH)

UiPath Inc. (PATH) operates within the burgeoning robotic processing automation (RPA) market, offering software solutions tailored to automate administrative tasks and optimize workflow processes. With a robust clientele exceeding 2,000 customers, each investing a minimum of $100,000 annually, PATH demonstrates its pervasive presence and appeal across diverse sectors.

Remarkably, PATH witnessed a 26% increase in its customer base year-over-year among clients spending at least $1 million annually, underscoring its widespread adoption among SMEs and major corporations. The trend aligns with the escalating demand for AI-driven solutions in recent years.

In the fourth quarter that ended January 31, 2024, PATH achieved notable financial milestones, with its total revenue surging by an impressive 31.3% year-over-year, reaching $405.25 million. This substantial growth was mirrored in its non-GAAP operating income, soaring by 59.6% compared to the previous year’s period, amounting to $110.52 million.

Furthermore, PATH's non-GAAP net income and non-GAAP net income per share rose 55.4% and 53.3% year-over-year to $128.51 million and $0.23, respectively.

PATH's recent attainment of authorized status within the Federal Risk and Authorization Management Program (FedRAMP®) also signifies a pivotal milestone, poised to expand the adoption of UiPath Automation Cloud™ Public Sector within federal government agencies. This accreditation reflects PATH's commitment to enhancing operational efficiencies through AI-driven automation, particularly within the public sector.

Additionally, the extended partnership between PATH and Google Cloud heralds promising prospects for customers seeking to embark on their automation journey. With PATH now available on Google Cloud Marketplace, clients can seamlessly access PATH's Business Automation Platform, leveraging Google Cloud's robust infrastructure to deploy and scale automation initiatives effectively.

As Wall Street anticipates a 19% year-over-year revenue surge to $1.56 billion for the fiscal year ending January 2025, coupled with a 7% growth in EPS to $0.58, PATH stands poised to capitalize on its innovative solutions and strategic partnerships, further solidifying its position as a frontrunner in the RPA landscape.

Bottom Line

The artificial intelligence (AI) sector's trajectory is remarkable, with the global AI market reaching $515.31 billion in 2023 and projected to soar from $621.19 billion in 2024 to $2.74 trillion by 2032, boasting a CAGR of 20.4%. This growth is fueled by increased AI applications, partnerships, small-scale providers, evolving business structures, and personalized service demands.

However, recent market volatility has prompted caution among investors, leading to a downturn in NVDA's stock. This vulnerability highlights the fragility of sentiment-driven gains, signaling a potential turning point for the stock. Meanwhile, alternative AI stocks such as MSFT, AMD, NOW, and PATH are poised for potential growth.

MSFT has demonstrated robust financial performance and technological innovation, while AMD's advancements in AI hardware and software position it as a leader in the field. NOW's cloud-based solutions and strategic partnerships offer stability and long-term growth potential, and PATH's success in the RPA market and strategic alliances underscore its promising future.

As investors reevaluate their portfolios amid NVDA's decline, these alternative AI stocks present diversified opportunities to capitalize on the industry's continued growth.