Thanks to the fast-paced economic recovery and growing demand, the basic materials sector rebounded from the pandemic lows last year. Moreover, commodity prices have rallied since the beginning of 2022 amid accelerating inflation rates and increasing operating costs amid worsening supply chain disruptions. Further, the recent Russia-Ukraine geopolitical crisis led to a sharp spike in commodity prices.
The bullish sentiment surrounding the basic materials sector is evident as iShares U.S. Basic Materials ETF (IYM) gained 12% over the past year. The current market trends will likely maintain a bullish outlook on the sector for the coming months.
Given the backdrop, Wall Street analysts expect quality basic material stocks Verano Holdings Corp. (VRNOF), Gevo, Inc. (GEVO), Nomad Royalty Company Ltd. (NSR), Trilogy Metals Inc. (TMQ), and Integra Resources Corp. (ITRG) to rally in the upcoming months.
Verano Holdings Corp. (VRNOF)
VRNOF is a vertically integrated multi-state cannabis operator in the U.S. The company engages in the cultivation, processing, and retail license of cannabis in Illinois, Arizona, Florida, Maryland, Ohio, Michigan, Massachusetts, Nevada, Arkansas, Pennsylvania, New Jersey, and West Virginia.
On February 1, 2022, VRNOF entered into an arrangement agreement under which Verano will acquire all of the issued and outstanding shares of Goodness in an all-share transaction valued at approximately $413 million. This acquisition of Goodness is expected to expand VRNOF’s operational footprint with the addition of New York, Minnesota, and New Mexico markets and boost its revenue streams.
In the fiscal 2021 third quarter ended September 30, 2021, VRNOF's revenue increased 105.7% year-over-year to $206.83 million. The company's gross profit grew 91.2% year-over-year to $222.17 million. Its income from operations rose 79% year-over-year to $186.51 million. The company's adjusted EBITDA increased 98.9% from the prior-year period to $110.70 million. VRNOF’s net income rose 27.1% year-over-year to $103.72 million.
The consensus revenue estimate of $209.96 million for the fiscal 2021 fourth quarter ended December 2021 represents a 183.6% year-over-year growth from the same period in 2020.
VRNOF slumped 24.6% year-to-date. However, the 12-month median price target of $29.64 indicates a 210.4% potential upside from yesterday’s closing price of $9.55. Each of the five Wall Street analysts that rated VRNOF rated it Buy. The price targets range from a low of $23.53 to a high of $37.65.
Gevo, Inc. (GEVO)
GEVO is a renewable fuels company. The company operates through four segments: Gevo; Agri-Energy; Renewable Natural Gas; and Net-Zero. GEVO’s products include renewable gasoline, diesel fuel, isooctane, sustainable aviation fuel, renewable natural gas, ethanol, animal feed, and protein. GEVO focuses on achieving zero carbon emissions and reducing greenhouse gas emissions with sustainable alternatives.
This January, GEVO began the startup of its renewable natural gas project, Gevo NW Iowa RNG, LLC, located in Northwest Iowa. This project is expected to produce approximately 355,000 MMBtu of RNG per year and annual distributions of $9 million to $16 million.
GEVO's total current assets grew 322.5% year-over-year to $351.79 million in fiscal 2021 ended December 31. The company's total assets increased 338.2% year-over-year to $666.48 million. GEVO’s proceeds from the sale of marketable securities amounted to $45.24 million for the fiscal 2021 fourth quarter.
Analysts expect GEVO's revenue for the fiscal 2022 first quarter ending March 2022 to come in at $105,500, representing a 13.4% rise year-over-year. The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters.
GEVO gained 15.9% over the past month and closed yesterday’s trading session at $3.80.
Each of the three Wall Street analysts that rated GEVO rated it Buy. The 12-month median price target of $13.00 indicates a 242.1% potential upside. The price targets range from a low of $5.00 to a high of $13.00.
Nomad Royalty Company Ltd. (NSR)
NSR is a gold and silver royalty company that purchases rights to the gold or silver produced from a mine. It is headquartered in Montreal, Canada. The company owns a portfolio of 10 royalty, stream, and gold loan assets. NSR’s royalty and other interests include RDM Gold Royalty, Troilus Gold Royalty, Moss Gold Royalty, and Robertson Gold Royalty. Its stream interests include Blyvoor Gold Stream, Woodlawn Silver Stream, and Bonikro Gold Stream.
On December 8, 2021, NSR entered into a gold purchase agreement with Ivanplats (Pty) Ltd, 64% owned by Ivanhoe Mines Ltd. NSR provided $75 million in gold stream funding to Ivanplats as a part of a $200 million stream co-investment with Orion Mine Finance. With this partnership, NSR might add high-quality, near-term cash-flowing assets to its portfolio and boost the revenue streams.
In the fiscal 2021 fourth quarter ended December 31, 2021, NSR's gross profit increased 56.4% year-over-year to $2.69 million. The company's total assets grew 29.6% year-over-year to $376.01 million for fiscal 2021 ended December 31.
The stock improved marginally over the past month and closed yesterday’s trading session at $7.06.
Each of the five Wall Street analysts that rated NSR rated it Buy. The 12-month median price target of $12.93 indicates an 83.2% potential upside. The price targets range from a low of $10.97 to a high of $15.28.
Trilogy Metals Inc. (TMQ)
TMQ is a base metals exploration company that explores and develops mineral properties in the U.S. It is headquartered in Vancouver, Canada. The company holds interests primarily in the Upper Kobuk Mineral Projects that include the Arctic and Bornite projects located in Northwest Alaska in the U.S. The UKMP consists of an approximately 427,690-acre land package consisting of state, patented, and native lands.
In January, TMQ announced the updated mineral resource estimate for the Bornite Project located in the Ambler Mining District of Northwest Alaska. The project is estimated to contain in-pit mineral resources of 41.7 million tonnes grading for 955 million pounds of copper and in-pit inferred mineral resources of 93.9 million tonnes at a base case 0.5% copper cut-off grade.
TMQ's cash inflows from financing activities grew 91.7% year-over-year to $416,000 in the fiscal year 2021 ended November 30, 2021. The company's cash and cash equivalents for the fiscal year 2021 amounted to $6.31 million.
Analysts expect TMQ's EPS for the fiscal 2022 first quarter ended February 2022 to grow 32.9% year-over-year.
Over the past year, TMQ dropped 52.3%. However, the 12-month median price target of $1.81 indicates a 75.7% potential upside from yesterday’s closing price of $1.03. Of the five Wall Street analysts that rated TMQ, two rated it Buy, while three rated it Hold. The price targets range from a low of $1.37 to a high of $2.35.
Integra Resources Corp. (ITRG)
ITRG is a mineral resources company that engages in acquiring, exploring, and developing mineral properties in the Americas. It is headquartered in Vancouver, Canada. The company focuses primarily on the development of the DeLamar project, which consists of DeLamar and Florida Mountain gold and silver deposits. The DeLamar project consists of 748 unpatented lodes, placer, mill site claims, and 16 tax parcels.
Last September, ITRG closed the deal financing for $17 million. The company might use the net proceeds from the deal to fund exploration and development expenditures at the DeLamar Project and other corporate purposes.
ITRG's rent income grew 65.9% year-over-year to C$21,500 ($16,892) in the fiscal 2021 third quarter ended September 30, 2021. The company's foreign exchange income increased 40.6% year-over-year to C$399,789 ($314,105). ITRG’s other comprehensive income rose 224.8% year-over-year to C$462,035 ($363,011) from the prior-year period.
ITRG declined 35.8% year-to-date. However, the 12-month median price target of $4.98 indicates a 260.6% potential upside from yesterday’s closing price of $1.38. Each of the three Wall Street analysts that rated ITRG rated it Buy. The price targets range from a low of $3.14 to a high of $6.50.
VRNOF shares were unchanged in after-hours trading Thursday. Year-to-date, VRNOF has declined -22.81%, versus a -7.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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