Dear New World Investor:

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Except it wasn’t “So-Crates”, as Bill and Ted called him. This quote was crafted by a student, Kenneth John Freeman, for his Cambridge dissertation published in 1907. Freeman did not claim that the passage under analysis was a direct quotation of anyone; instead, he was presenting his own summary of the complaints directed against young people in ancient times.

And pretty much ever since. Lately, the big complaints seem to be variations on “they’re always on their phones.” Yes, they are and will be for the next 100 years or so. One favorite variation is “social media is destroying them” in various ways, from Instagram showing girls impossible-to-match standards of beauty to boys scrolling for nekkid ladies. Older authorities assure us that only they can protect the younger generation, so they need the power to force Google, Facebook, TikTok, Twitter (now X), and everyone else to toe the authorities’ line.

In this environment, wouldn’t it be smart for a social media CEO to say his company is definitely not social media? It’s really about connecting family and friends in a positive, uplifting way? Especially if it started as a way to sext with a smaller chance of your dick pic or boob shot coming back to haunt you 10 years later? Welcome to Snap (SNAP).

Snap bills itself as a camera company, but what they really offer is an image- and video-based social media experience. They were founded in 2010 as Snapchat, a visual messaging app that has evolved to offer various choices such as Camera, Visual Messaging, Snap Map, Stories, and Spotlight that enable people to communicate visually for free through short videos and images. They also have a popular subscription service, Snapchat+ with over 11 million members, that offers extra functions.

The “camera company” link is Spectacles, an eyewear product that connects with Snapchat and captures photos and video from a human perspective. While they make some money from Spectacles, our interest is in their advertising products, including regular and AR ads, dynamic ads, story ads, and commercials.

Snap has a loyal and somewhat different demographic from Meta’s Instagram, which essentially copied their idea. The company is smaller than Meta and spends much less on R&D, but they can copy what Zuckerberg does in monetizing their user base with advertising. It’s important to understand that Meta and Snap do not sell their customer lists. Advertisers create ads and tell Snap what demographic characteristics might be interested in them. Snap then runs AI models to leverage their users’ history and show the ad to people most likely to respond. The better the match, the higher the advertisers’ return on investment, and the more likely they are to increase their ad budget with Snap.

Since I recommended Meta in April 2018 at $159.34, the stock has way more than tripled. As you can see below, SNAP is selling near its lows.

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But is it cheap? Snap has about an $18 billion market capitalization and trades for 8.4x book value (which includes $3.1 billion in cash), 3.5x sales per share, and 27.9x the 2025 average consensus earnings estimate of 37¢ per share. That doesn’t look especially cheap on the surface, although it’s not out of line for a big technology company today.

But let’s look under the hood. Revenues are growing around 15% a year and I think that rate will accelerate over the next few years. That average 2025 earnings estimate of 37¢ is in a huge range from 23¢ to 64¢, and analysts have consistently underestimated SNAP.

The range for September quarter earnings, to be announced on October 29, is ridiculously large at 3¢ to 9¢. Revenues will be up about 34% to $1.36 billion. Average revenue per user (ARPU) was $2.86 in the June quarter, up from $2.69 in last year’s period, and Snap’s AI targeting is just kicking in. The company had 432 million daily active users and 850 million monthly active users in the June quarter. I expect they added 10 million or so in the September quarter. Advertisers are starting to pay attention:

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Their adjusted gross profit margin has been stable and the 2023 increase in infrastructure costs is behind them.

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Snap has served more than 75% of 13- to 34-year-olds in over 25 countries. Today, approximately 80% of Snapchatters are above the age of 18. In the June quarter, global content viewers grew 12% year-over-year, and global time spent watching content grew 25% year-over-year and 10% quarter-over-quarter. Monetizing that is Snap’s opportunity to continue to beat Wall Street estimates and attract Buy recommendations. That is why I want you to Buy SNAP under $11 for an $18+ target.

* * * * *

This morning’s Consumer Price Index report showed year-over-year headline inflation softened slightly in September, down to 2.4% from 2.5% in August. It was the lowest annual headline reading since February 2021, but a tick above the 2.3% consensus expectation. So Wall Street traders pretended “inflation came in hot” and took stocks down early on to shake out some retail holders.

The monthly headline number was up 0.2%, the same as August, but also a tick above the 0.1% expectation.

Shelter rose 4.9% from last year, much less than August’s 5.2% increase as the lagging rent index slowly catches up with the real world. Shelter rose 0.2% month-over-month after rising 0.5% in August. Shelter, along with the food index that rose 0.4% month-over-month in September, contributed to over 75% of the monthly increase in overall inflation.

The far more relevant (to the Fed, not to your pocketbook) core CPI was up 3.3% year-over-year versus 3.2% in August. It rose 0.3% month-over-month, the same as August but yet another tick higher than the 0.2% expectation. According to the CME FedWatch tool, no one expects a 50 basis point cut at the Fed’s November 7 announcement. 89% of interest rate traders expect a 25bps cut and 11% expect no cut.

The “no cut” group thinks last Friday’s “strong” monthly payrolls report – who knows what the real numbers were, especially in an election year – put the kibosh on a 50 basis point (50bps or ½ of one percentage point) increase in the Fed funds rate at the November 7 meeting. As I’ve been saying, look for 25bps in November and another 25bps on December 18.

The payrolls report showed 254,000 added jobs in September, clobbering the 150,000 consensus estimate. The unemployment rate fell to 4.1% from 4.2% in August. August payroll additions were were revised up from 142,000 to 159,000.

Click for larger graphic h/t Yahoo Finance

One increasing problem with the monthly report is that just 62% of the businesses polled responded on time to be included, the lowest response rate in 14 years. That was down from 68% last September, and 77% in the average September since 2010.

Click for larger graphic h/t @PantheonMacro

Of course, we won’t know the real number for about nine months, when the Business Employment Dynamics report comes out. By then, no one will care. FWIW, ADP’s National Employment Report for August showed private payrolls in the US added just 99,000 jobs during the month, well below economists’ estimates for 145,000 and fewer than the 122,000 jobs added in July. The August data marked the fifth straight month payroll additions slowed from the month prior. Meanwhile, the Job Openings & Labor Turnover Survey (JOLTS) data this week showed July ended with the lowest amount of job openings in the US labor market since January 2021.

Wage growth rose to 3.8% year-over-year, up from a 3.6% annual gain in August. On a monthly basis, wages increased 0.4%, higher than the 0.2% seen the month prior. As I wrote last week, this will not bother the Fed because Fed Chairman Powell has said that the labor market is NOT a source of inflationary pressure. His simplified wage cost push inflation model – wage growth less productivity equals inflation – taken with positive comments he made about productivity growth, suggests the Fed is comfortable with 4% wage growth due to an increase in productivity growth from ~1.5% to 2%.

The factor that bothered me most from this report is that the number of government workers exploded higher, which meant the difference between a 4.1% and 4.5% unemployment rate.

Click for larger graphic h/t Andrew Zatlin

This morning’s report showing jobless claims surged to their highest level since August 2023 tells you what is really going on in the private sector. Part of this is from Hurricane Helene and the Boeing strike. but some unimpacted states also saw large increases. On balance, expect 25bps on November 7 and another 25bps on December 18

Stocks are riding a host of tailwinds into the final months of the year, including the Fed’s dovish pivot on rate cuts in late August and the surprise unveiling of billions in new fiscal stimulus from China. The S&P 500, which ended the third quarter at an all-time closing high, has risen for each of the past five weeks and eight of the past nine, taking its year-to-date gain to 21.2% as of today.

Stocks are likely to get further support from the third quarter earnings reports as well as expanding corporate profits over the final three months of the year and beyond as the economy continues to outperform forecasts. S&P 500 September quarter earnings are forecast to grow 5% from last year to around $5.11 billion. December quarter profits are expected to rise 12.5%.

We are deep into the stock buyback blackout period that starts unwinding in a major way at the end of October, pushing stocks higher in November and December.

Click for larger graphic h/t @themarketear

The S&P 500 typically sells off by 4% to 5% about a month going into election day and then rallies to year end on a clear resolution. I’m not so sure we’ll have a clear resolution this time because whichever party loses has already lawyered up to challenge the results of a close election. The market sure didn’t like the 2000 Bush-Gore debacle.

Click for larger graphic h/t Deutsche Bank

Goldman Sachs trimmed their 2024 earnings growth forecast to 8.2% from 8.4% but still sees momentum building into next year. They boosted their 2025 profit growth forecast by five percentage points to a full-year gain of 11%. They wrote: “The upward revision to our 2025 EPS estimate is greater margin expansion.” They expect the S&P 500 to hit 6000 this year and then rise another 300 points to a 2025 year-end target of 6300.

Market Outlook

This bull market started on October 12, 2022. It’s about to turn two years old, but that’s young for a bull market – even for ones that start in October. This bull market is up 61%, compared with the average bull market lasting 5½ years and gaining 181%. It could end soon, but many more years of gains would be perfectly normal.

Click for larger graphic h/t @ryandetrick

The S&P 500 added 1.4% since last Thursday. The Index is up 21.2% year-to-date and is having its best year since 1997.

Click for larger graphic h/t @LanceRoberts

This is the first time in the 21^st century the S&P 500 has returned at least 20% through the first three quarters of the year. History says that momentum could carry the index higher in the December quarter. Since its inception in March 1957, the Index has returned at least 20% through the third quarter of the year just seven times. In those years, the S&P had a median return of 31% for the full year. In order to return 31% in 2024, it would reach 6249 by December 31. That implies 8.1% upside in the remaining weeks of the fourth quarter – well above Wall Street’s expectations. It’s not likely, but possible.

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The Nasdaq Composite gained 2.0% and is up 21.8% for the year. Nasdaq 100 (NDX) seasonality is very strong from here, so the real pain trade is up.

Click for larger graphic h/t @themarketear

The SPDR S&P Biotech Exchange-Traded Fund (XBI) fell 0.5% as investors continue to avoid biotech. It is up only 7.7% year-to-date. The small-cap Russell 2000 added a measly 0/3% and is up only 7.9% in 2024.

The fractal dimension is doing a good job of consolidating the summer rally, but it still has a long way to go. Election uncertainty is our friend here, as is the Fed not running the money printer in panic mode. There are still a few weeks to go to hit the fully consolidated 55 level.

Top 5

Changes this week: None

Near-Term – chronological order
SCYX – ScyNexis – Data releases and resolution of the manufacturing problem
USL United States 12 Month Oil Fund, LP – crude should rise quickly
EQT EQT –natural gas price rebound
CMPS – Compass Pathways – Rebound from negative AdCom review of MDMA and Phase 3 data release in December quarter
FCX Freeport McMoRan – copper shortage
AKBA Akebia Therapeutics – Vafseo TDAPA approval in January

Long-Term – alphabetical order
ABCL AbCelllera – Will become a huge pharma royalty company
UUUU Energy Focus – Domestic uranium supplier
EQT EQT – largest US natural gas company
IBIT iShares Bitcoin Trust – Bitcoin is headed for $100,000
META Meta – a (the?) leader in the metaverse
PLTR Palantir – a (the?) leader in AI applications software
RKLB Rocket Lab – #2 to SpaceX in space
SCYX ScyNexis –First new antifungal in 20 years

Economy

The Atlanta Fed’s GDPNow model for September quarter growth has climbed to 3.2%, well over the Blue Chip consensus for 1.9% and the general Wall Street expectation for 2.5%. Will we see a surprisingly strong GDP report to help Kamala to victory?

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Coming Events
All times below are ET, and most presentations and slides are archived on the companies’ websites so you can listen to them. It’s ScyNexis Week!

Thursday, October 17
SCYX – ScyNexis – 11:30am – Maxim Healthcare Virtual Summit
SCYX – ScyNexis – 1:45pm – IDWeek

Friday, October 18
SCYX – ScyNexis – 3:15pm – Poster presentation at IDWeek

Big Tech: The Biotech & Digital Dominators MegaShift
There are at least four ways to make money in the stocks of these large, growing, dominant companies. You can:
* * Buy a stock and hold it
* * Buy a stock and write a call option against it
* * With a Level IV options account, write an out-of-the-money put option
* * With a Level IV options account, write an out-of-the-money put option and use part of the premium to buy an out-of-the-money call option

Apple (AAPL – $229.04) iPhone 16 Pro demand has generally met expectations so far, but that of the iPhone base model and 16 Plus remain lackluster compared to last year, according to TF International Securities analyst Ming-Chi Kuo.

Apple is reportedly set to unveil its first Apple Intelligence features later this month, with the launch of its new iOS 18.1 operating system on October 28. That would give first access to iPhone 16, iPhone 15, and iPhone 15 Pro users who update their software. I expect it to ignite an upgrade cycle for the holiday season.

Ming-Chi Kuo also said Apple appears poised to unveil a new version of the Vision Pro mixed reality headset next year, with mass production in the second half of 2025. It will be powered by Apple’s M5 chip to create a better Apple Intelligence user experience, Kuo wrote: “In particular, if the M5 Vision Pro can integrate something like Open AI’s Sora [Sora is Open AI’s text-to-video generator], it may elevate the user experience of the head-mounted display device to unimaginable levels. The impact of text-to-video AI models in the head-mounted display device experience will likely be more impressive than exists in existing mainstream consumer devices.”

The current Vision Pro uses Apple’s less powerful M2 processor, which was introduced in June 2022. It also has the R1 coprocessor that is used for real-time input processing. Aside from the chip and Apple Intelligence, Kuo said other hardware specs and designs in the Vision Pro “won’t change much, which should help lower costs and price points.”

According to Bloomberg, Apple will unveil a new entry-level iPhone SE in 2025. It will be based on the iPhone 14 and will support Apple Intelligence. The current iPhone SE is based on the design of the iPhone 8. There will also be new iPad Air models. Finally, Apple is planning to introduce new Macs this month. AAPL is a HOLD – expect to move back to Buy under $175 for new iPhones.

Gilead Sciences (GILD – $84.67) was upgraded to Overweight by Wells Fargo based on the upcoming HIV prevention drug launch. They believe the PrEP launch could “propel GILD’s next phase of growth.” Wells estimates the PrEP opportunity at more than $5 billion in sales by 2030 compared to the consensus estimate of $2 billion. GILD is a Long-Term Buy under $80 for a first target of $120.

Meta Platforms (META – $583.83) held their Meta Connect 2024 conference in late September. I’ve been thinking about some of the longer-term implications of what they showed. I think they’re making a shift towards AR (augmented reality) over VR (virtual reality) and the metaverse, at least for now. They showed a cheap $300 Meta Quest 3S VR headset for cost-conscious consumers that still provides a comprehensive VR experience.

They also showed impressive AI translation services, demonstrating this with two-time UFC champion Brandon Moreno. They’re able to change the way a person’s lips move to fit the language of the translation while maintaining the initial speaker’s tone. This will become more comprehensive over time and make it much easier to develop global connections without severe language barriers. Meta is likely to lead the commercial development of this technology.

As the demo with Brandon Moreno showed, Meta seems to be moving towards a celebrity endorsement and luxury marketing effort. Zuckerberg seems to want to take the company away from its status as a social media company towards an integrated physical/virtual technology company with social media as its foundation. We see this in its new Ray-Ban Meta Smart Glasses with AI chatbot capabilities that sold out faster than anticipated and actually had supply issues due to the high demand. Meta also introduced Orion, their first true AR glasses that combine holographic displays and new electromyography technology for hands-free interaction. (Electromyography is a technique for evaluating and recording the electrical activity produced by skeletal muscles.) As Meta develops this market, they could create a moat similar to, although smaller than, the iPhone.

My experience is that virtual connection like Zoom meetings is no substitute for physical reality. If Meta continues to focus on their smart glasses and AR glasses technologies that enhance physical interactions instead of replacing them, while continuing to be one of the top investors in AI, I’m going to have to raise my buy limit.

Piper Sandler released their 48^th semi-annual Taking Stock With Teens survey that took in more than 63 million data points to summarize teen preferences and spending trends. TikTok was reported as the favorite social app among teens, while Meta’s Instagram came in second and Snapchat ranked third.

KeyBanc Capital Markets raised their target price by $105 from $550 to $655 per share, saying: “Our checks indicate that the ad market remained solid in Q3, and favorable currency movements suggest potential upside to Wall Street revenue and profitability forecasts. Additionally, we believe product cycles at Meta are likely to sustain solid growth into 2025. Big picture, we believe progress in Facebook Reality Labs and AI are causing more investors to look through operating losses and assign a higher P/E multiple.”

Cantor Fitzgerald raised their target price by $10 to $670, saying September quarter revenue gains will likely impress despite “…lingering discomfort on return on invested capital of AI investments. We think Meta has plenty of runway in ongoing contributors (A+, Reels, recommendations) to revenue growth in fiscal 2025 and the impact of generative-AI investments could increasingly emerge over the next 12-18 months. We expect the depth of engagement to improve as use cases expand and Meta merchandises Meta AI increasingly into various products and services.”

META is a Hold – I still expect to move back to Buy, but probably well over $400.

Palantir (PLTR – $43.52) has only five Buy ratings from the 20 analysts who cover the stock, with the remainder split between Hold and Sell. Wedbush analyst Dan Ives raised his target price from $38 to $45 while keeping an Outperform rating. He said that he is “more bullish” on Palantir going forward, noting that his recent channel checks indicated incrementally more enterprises are strategically discussing how they will deploy the company’s Artificial Intelligence Platform during 2025. He said the increased price target reflects higher confidence in Palantir’s enterprise-driven artificial intelligence strategy. He added that he views this as a clear “game changer” for the Palantir story as the use cases of AI start to take hold over the next 12 to 18 months. The company is “in a prime spot to continue expanding its pipeline/deal flow while providing more use cases coming forward to address critical problems across industries.”

The Street‘s Stephen Guilfoyle said: “We have not had a precise target since the $36 level had been taken and held.” That’s changed. He unveiled a new $48 target on Palantir this week.

He pointed out that Palantir will report September-quarter results in November, and analysts are looking for adjusted earnings of nine cents per share on revenue of $703.7 million. He wrote: “If this is indeed the way the cookie crumbles, those numbers would be good for earnings growth of 29% on revenue growth of 26%. Of the 11 sell-side analysts I see that post sales estimates for Palantir, all 11 have increased their estimates since the start of the third quarter.”

PLTR is a Buy under $22 for a $100+ target.

SoftBank (SFTBY – $30.36) bought back another 3,314,700 shares of its stock between September 2 and September 20. CEO Masayoshi Son is going to squeeze everyone out of the stock but us until it gets to a substantial premium to hard net asset value from today’s 50% discount. SFTBY is a Buy under $25 for a first target of $50 in the next two years.

Small Tech

Fastly (FSLY – $7.24) slipped after Raymond James downgraded the stock from Strong Buy to Market Perform, although they kept their $8 target price. They wrote: “Fastly has been resetting the business over the course of the year, and has expanded its product offerings as well. We believe these can get traction as the company sorts through the cost-cutting at media/streaming companies that impacted results in 2024, as well as the outlook over the next 12 months. That said, it may take a few more quarters for all the new efforts to show improved top line and FCF results, making a less aggressive rating more appropriate.”

I believe Fastly’s investments will pay off much faster than that as we are in an environment that rewards companies to move quickly to improve service and lower costs. FSLY is a Buy up to $10 for a 3- to 5-year hold to $80+ as Compute@Edge drives customer acquisition and revenue growth.
Primary Risk:Content and applications delivery networks are a competitive area.

PagerDuty (PD – $18.12) introduced enterprise-grade, AI-powered innovations to future-proof operations and improve the business results of their customers. These features help operations teams to automate their processes and reduce time spent at every stage of the incident management lifecycle. This will protect their company’s customer experience and mitigate the risk of operational failure while replacing point solutions.

The new features use automation and machine learning to help teams predict the scope of impact and drive action to resolve issues before they become outages. This is a big deal for PagerDuty’s revenue growth and market share.

* * PagerDuty Advance Assistant for Microsoft Teams adds generative AI capabilities to Microsoft Teams to help customers work where they are. PagerDuty Advance provides helpful insight at every step of the incident lifecycle, generating summaries and triage support for faster resolution. Teams can work smarter with AI-powered contextual support from chat in order to respond and recover faster.

* * Automation on Alerts helps reduce the total incident count, easing the load on resource-strapped teams and giving them time back to focus on value-add work. Operations teams can configure automation to be triggered at the alert level, helping teams catch issues before they escalate into incidents.

* * Global Intelligent Alert Grouping accelerates incident resolution, freeing up time and resources to build better experiences. PagerDuty’s AI models now offer greater precision by using enhanced pattern recognition to work across services to help teams separate signal from noise.

* * Unified Chat Experience and Incident Types Power Guided Remediation combined with PagerDuty Advance generative AI capabilities, lets teams manage an incident from start to finish using dynamic commands to collaborate directly from where they work. Users will be able to reclassify incident types, trigger incident workflows, establish tasks and roles, and reassign incidents across services, without leaving Microsoft Teams or Slack.

With the PagerDuty Advance chat experience, it is estimated that customers can save approximately $490,000 for every 10 engineers responding to an incident. The company cited a global payments processing customer utilizing PagerDuty Advance who has realized significant efficiency gains, reducing four days of manual work each month, and averting 45 minutes of disruption during each major incident. This optimization translates into millions of dollars in monthly savings. PD is a Buy up to $30 for a 2- to 5-year hold as their digital operations management Software-As-A-Service gains market share.
Primary Risk: Digital operations management is a competitive area.

Rocket Lab USA (RKLB – $9.39) won a NASA contract to complete a study for retrieving rock samples from the Martian surface and bringing them to Earth for the first time. The study will explore “a simplified end-to-end mission concept that will be delivered for a fraction of the current projected program cost and completed several years earlier than the current expected sample return date in 2040.”

RKLB is a Buy up to $13 for my $30+ target as low earth orbit satellites and space exploration grow.
Primary Risk: A new competitor emerges.

Biotech MegaShift

If you can afford it – and it would not be too big a position in your portfolio – putting $2,000 into each of these speculative biotechs might be a good way to start. Buying these out-of-favor, fallen, or forgotten companies that can get important products through the FDA at very low market capitalizations seems like a good strategy to me.

Risks

Development-stage biotechs are subject to investor sentiment swings from wildly optimistic to excessively pessimistic – mostly the latter recently. After the Primary Risk for each company, I’ve added the clinical stage of their lead product, the probable time of their first FDA approval, and the probable time of their next financing.

As always, you need to think about an appropriate position size. You could buy a full position upfront and then just hold on, or buy some upfront and leave room to add more on the inevitable financings, transient clinical trial setbacks, and the like.

AbCellera Biologics (ABCL- $2.50) announced an upcoming poster presentation on its T-cell engager platform at the Society for Immunotherapy of Cancer (SITC) annual meeting on November 8. I have not written much about this relatively early-stage program, but it could turn into a very big deal. More coming. Buy ABCL up to $6 for a long-term hold to $30 or more.
Primary Risk: Partnered and owned drugs fail in the clinic.
   Clinical stage of lead product: Partnered: Various Owned: Preclinical
   Probable time of next FDA approval: 2027-2028
   Probable time of next financing: 2026-2027 or never

Akebia Therapeutics (AKBA- $1.28) announced a multi-year commercial supply contract encompassing all US Renal Care dialysis centers, a major provider of in-center and home dialysis. The contract enables USRC’s nearly 2,000 attending physicians to prescribe Vafseo for patients on dialysis as deemed clinically appropriate when it is expected to be available in January 2025. USRC will create the necessary protocol before then.

Speaking of which, in what must be near-record time the Center for Medicare & Medicaid Services has determined that Vafseo meets the criteria for the Transitional Drug Add-On Payment Adjustment (TDAPA) in the anemia management end-stage renal disease (ESRD) prospective payment system functional category, beginning on January 1.

Additionally, Akebia received a Level II Healthcare Common Procedure Coding System (HCPCS) code for Vafseo which will be used for billing for the product by dialysis organizations for Medicare enrollees. Within the next several weeks, CMS is expected to issue a Medicare Claims Processing Change Request that will give further billing guidance to dialysis organizations to obtain the separate TDAPA payment for the next two years under Medicare.

With TDAPA approval, the sales force can put the pedal to the metal in closing contracts, which has to happen before centers create a protocol, which has to happen before their doctors can prescribe Vafseo. At the same time, they are calling on doctors to build up demand for a rapid launch in less than 90 days. Buy AKBA up to $2 for the vadadustat launches in the EU, UK, and US.
Primary Risk: Vadadustat doesn’t sell in the US.
   Clinical stage of lead product: Approved
   Probable time of next approval: NM
   Probable time of next financing: Never

Editas Medicine (EDIT – $2.96) sold a portion of their future license fees and other payments under their Cas9 license agreement with Vertex Pharmaceuticals to DRI Healthcare Trust for an upfront cash payment of $57 million. That is immediate non-dilutive capital to fund further pipeline development and related strategic priorities. With 100 more genomic medicine programs advancing at 10 major companies, expect to see a lot more non-dilutive financing over the next few years.

In this deal, Editas sold up to 100% of certain future annual license fees, ranging from $5 million to $40 million per year and a mid-double-digit percentage of Editas Medicine’s portion of a $50 million contingent upfront payment. In addition to their portion of any such contingent upfront payment, Editas retains rights to fixed annual license fees for 2024 and a mid-single-digit million-dollar payment due to Editas if Vertex achieves certain annual sales milestones. EDIT is a Buy under $6 for a double in 12 months and a long-term hold to much higher prices.
Primary Risk: Other companies’ gene-sequencing drugs fail in the clinic.
   Clinical stage of lead product: Partnered: Approved; Owned: Preclinical.
   Probable time of next FDA approval: 2026
   Probable time of next financing: 2026 or never

Inovio (INO – $5.41) has been weak since they announced that the Biologics Licensing Application (BLA) filing for INO-3107 has been delayed to mid-2025 due to manufacturing issues with the CELLECTRA delivery device. They had $110.4 million in cash at the end of June, which gives them a cash runway into the September 2025 quarter. But companies rarely run their cash under a six-month runway. I expect the company to either resolve the CELLECTRA issue and file the BLA in the March 2025 quarter or do a stock offering then. INO is a Buy under $14 for a very long-term hold.
Primary Risk: Their drugs fail in the clinic.
   Clinical stage of lead product: Phase 3
   Probable time of first FDA approval: Early 2026
   Probable time of next financing: March 2025 or after FDA approval in 2026

Medicenna (MDNAF – $1.59) will present three posters at the Society for Immunotherapy of Cancer (SITC) annual meeting. They will present updated clinical data from the ongoing Phase 1/2 ABILITY-1 Study evaluating MDNA11 as both a monotherapy and in combination with Keytruda in patients with advanced or metastatic solid tumors. The third poster will cover new pre-clinical data on MDNA113, a novel first-in-class, masked, tumor-targeted bifunctional anti-PD1-IL-2 Superkine. MDNA55, Medicenna’s IL-2 agonist in glioblastoma, will also be presented at the conference. Buy MDNAF under $3 for a first target of $20, then maybe $40.
Primary Risk: Their drugs fail in the clinic.
   Clinical stage of lead product: Entering Phase 3
   Probable time of first FDA approval: 2025
   Probable time of next financing: 2025

ScyNexis (SCYX – $1.52) uploaded a new corporate presentation that says (slide 3): “We anticipate filing our request with the FDA in Q4 of 2024 to lift the MARIO study clinical hold.” I expect the stock to move up when they announce the filing, again when the FDA lifts the hold, some more when they dose the first new patient, and even more when they start collecting milestone payments from GSK.

The company will make oral and poster presentations on SCY-247 next Thursday and Friday at the Infectious Diseases Week (IDWeek) conference. Buy SCYX under $2.50 for a first target price of $20 after ibrexafungerp is approved for hospital use and a buyout at $50.
Primary Risk: Ibrexafungerp fails to sell.
   Clinical stage of lead product: Approved
   Probable time of next FDA approval: 2025
   Probable time of next financing: Never

Inflation MegaShift

Gold ($2,648.60) fell $24.60 on Tuesday, putting in the biggest down candle in a while. It was nothing huge, but worth watching, especially as gold is such a darling these days. The short-term trend channel remains in place, with big support at $2,600. The 50-day moving average is down at $2,533.

The last time the 10-year Treasury note traded this high, gold was about $175 lower. This chart shows gold versus the 10-year inverted.

Click for larger graphic h/t @themarketear

The dollar does matter. The last time the dollar was this strong, gold traded close to $2,500. This chart shows gold versus the dollar (DXY) inverted.

Click for larger graphic h/t @themarketear

Momentum in gold remains powerful, but we are not alone in being bullish on gold here. This chart shows CFTC net long minus short position in futures for the Managed Money category.

Click for larger graphic h/t @themarketear

A sell-off would trigger Commodity Trading Advisers into selling their big gold long.

UBS upgraded their already bullish view on gold to much higher than consensus expectations: “We lift our gold price targets, moving them to our previous upside scenario – we now expect the market to rally towards $2,800 by year-end and to $3,000 in 2025. Gold’s rally this year has been driven by a combination of factors – broad-based buying across the different parts of the market combined with a lack of sellers. We expect these trends to continue.”

Click for larger graphic

Over the past 10 years, since the Great Financial Crisis and our government’s decision to sacrifice the dollar to bail out the banks – and all of the bailouts that have followed – the price of gold has gone from around $700 per ounce to $2,648 today. That’s a 264% increase. Priced in gold, the S&P 500 is actually down since the first of the big Wall Street bailouts, the September 1998 financial rescue of Long-Term Capital Management. At that time, the S&P 500 was worth 3.5 ounces of gold. Today, it’s worth only 2.2 ounces. Funny what happens when you destroy your economy by printing money.

The fractal dimension did a picture-perfect turn right at the fully exhausted 30 level and now should consolidate for a few weeks under the weight of a stronger dollar to get back up to 55. The yellow metal isn’t usually this well-behaved, though.

Miners & Related

Coeur Mining (CDE – $6.40) is acquiring Canadian miner SilverCrest Metals for $1.7 billion in stock. On the conference call (AUDIO HERE and SLIDES HERE), management said SilverCrest’s high-grade Las Chispas mine in Mexico is a low-cost, high-margin producer that sold around 10.25 million silver equivalent ounces in 2023 at an average cash cost of $7.73 an ounce. The combined companies will produce around 21 million ounces of silver and 432,000 ounces of gold in 2025. SilverCrest has substantial exploration potential, and we know Coeur is good at that.

Click for larger graphic

Financially, the SilverCrest acquisition will significantly boost Coeur’s earnings before interest, taxes, depreciation, and amortization (EBITDA) from $521 million to $702 million and free cash flow from $272 million to $361 million in 2025. CEO Mitch Krebs said: “The acquisition of SilverCrest creates a leading global silver company by adding low-cost silver and gold production and significant free cash flow to our rapidly growing production and cash flow driven by the recent expansion of our Rochester silver and gold mine in Nevada. Together with SilverCrest’s large and growing cash balance and no debt, our balance sheet is expected to be materially strengthened on day one.”

Cash goes from $74 million to $196 million. This will accelerate Coeur’s reduction of their remaining $629 million of debt. Coeur owns 67% of the combined company. There will be a shareholder vote around yearend and the deal will close in the March quarter. SilverCrest management did this because they think Coeur stock is cheap. They’re right. Others like the deal: The Coeur/SilverCrest Merger Has My Blessing. CDE is a Buy under $5 for a $20 target as gold goes higher.
Primary Risk: Prices of precious metals fall due to US dollar strength.

Sandstorm Gold (SAND – $5.83) sold 17,350 attributable gold equivalent ounces in the September quarter and realized preliminary revenue of $44.7 million. That compares to 21,123 attributable gold equivalent ounces and $41.3 million in revenue in last year’s period. Preliminary cost of sales excluding depletion was $5.3 million, resulting in cash operating margins of approximately $2,215 per attributable gold equivalent ounce. That compares to $4.7 million and $1,699 per attributable gold equivalent ounce last year. They’ll hold their conference call on November 8. SAND is a Buy under $10 for a $25 target.
Primary Risk: Prices of precious metals fall due to US dollar strength.

Cryptocurrencies

Cryptocurrencies are a diversifying asset that offer a unique opportunity to make (or lose!) a lot of money quickly. You can easily buy bitcoin and other cryptocurrencies at Coinbase, Block, or Robinhood.

Bitcoin (BTC-USD on Yahoo – $59,594.91) has been hit harder than gold by increasing long-term interest rates and the stronger dollar. Today’s dip under $60,000 probably is transient.

FWIW veteran cryptocurrency analyst Bob Loukas trades a four-year cycle of bitcoin. He says that bitcoin is close to the third year—a point in time when explosive growth normally takes place. He wrote: “Bitcoin closes the second year of its four-year cycle next month, entering the third and historically explosive year of the cycle.”

He said that since the $73,835 record high on March 14, “An eight-month base has been built, sentiment reset, and rates are easing. I mean, the script is perfect,” adding that a combination of flipping investor sentiment and likely interest rate cuts could trigger a parabolic uptrend. He’s looking for $150,000.

Click for larger graphic

BTC-USD, ETH-USD, IBIT, and ETHA are Strong Buys.
Primary Risk: Bitcoin falls due to over-regulation or is surpassed by another cryptocurrency.

iShares Bitcoin Trust (IBIT- $33.95) remains the cheapest and easiest way to buy bitcoin. IBIT is a Buy for the 2028, 2032, and 2036 halvings.
Primary Risk:Bitcoin falls due to over-regulation or is surpassed by another cryptocurrency.

iShares Ethereum Trust (ETHA- $17.91) remains the cheapest and easiest way to buy ethereum. ETHA is a Buy.
Primary Risk:Ethereum falls due to over-regulation or is surpassed by another cryptocurrency.

Commodities

Oil – $75.42

Oil touched $77 on Monday and held most of it for the week. Gasoline storage had another huge draw of 6.304 million barrels because so many Gulf refineries are closed.

Click for larger graphic h/t @HFI_Research

It’s very clear that US shale oil production is getting gassier and gassier, which means shale oil production will keep declining. At the same time, US implied oil demand (4-week average) is going from “decent” to “good.”

Click for larger graphic h/t @HFI_Research

When the rubber band that is the current low price of paper oil snaps back, it will be fast and furious. Got oil?

The July 2026 Crude Oil Futures (CLN26.NYM – $68.19) are a Buy under $70 for a $200+ target. Only buy futures for all cash; do not use margin.

The United States 12 Month Oil Fund, LP (USL – $39.15) is a Buy under $40 for a $100+ target.

Vermilion Energy (VET – $10.09) is a Buy under $11 for a target price of $24 or more.
Primary Risk: Oil prices fall.

EQT (EQT – $36.62) will provide much of the natural gas that will be burned to generate electricity for AI applications and electric vehicles. The US really doesn’t have large natural gas-fired utilities yet, but they’re coming. The five biggest natural gas power plants in the world today are:

#1 – Surgutskaya GRES-2, Russia – 5,597 megawatts (MW)
At 5,597MW installed capacity, Surgutskaya GRES-2 (Sugrut-2), a combined cycle power plant located in the Russian city of Surgut, is the world’s biggest gas-fired power station. The facility is owned and operated by E.ON Russia. It consists of six 800MW units commissioned between 1985 and 1988, and two advanced gas-fired combined cycle units with a combined capacity of 797.1MW commissioned in July 2011. The latest units added to the power station are based on GE 9FA gas turbines and have an efficiency rate of 55.9%.

Surgutskaya GRES-2 consumes approximately 10 billion cubic meters of gas annually, which mostly comes from the oilfields in the Tyumen Region of Russia. The power plant generated 39.85 billion kilowatts of electricity in 2013.

#2 – Futtsu LNG thermal power station, Japan – 5,040MW
The 5,040MW Futtsu liquefied natural gas (LNG)-based thermal power station located in Chiba, Japan, is owned and operated by Tokyo Electric Power Company (TEPCO). It consists of four combined cycle power plants commissioned between 1985 and 2010.

The first two plants, with 1,000MW installed capacity each, were commissioned in 1986 and 1988. They are comprised of 14 combined cycle units based on GE’s 9E gas turbines. The third plant, Futtsu-3, comprising four 380MW GE 109FA+e combined cycle systems with 55.3% design thermal efficiency, was commissioned in 2003. The 1,520MW Futtsu-4 was commissioned between 2008 and 2010, and consists of three GE 109H combined cycle systems with 58.6% design thermal efficiency.

The LNG fuel for the Futtsu thermal power plant is supplied through an underwater pipeline from the nearby Futtsu LNG terminal, which has the capacity to handle nine million tonnes of LNG per annum.

#3 – Kawagoe power station, Japan – 4,802MW
Chubu Electric Power Company’s Kawagoe thermal power station located in Kawagoe, Mie, Japan, with 4,802MW installed capacity, ranks as the world’s third biggest gas-fired power station. The plant consists of four generating units, all running on LNG.

Kawagoe’s first two LNG-fired units of 700MW capacity each were commissioned in 1989 and 1990. The boilers and steam turbines for these units were provided by Mitsubishi and Toshiba respectively. The third and fourth LNG-based combined cycle generating units comprised of Hitachi’s MS7001FA gas turbines and Mitsubishi’s ‘F’ series gas turbines respectively were commissioned in 1996 and 1997.
The power station uses six LNG tanks with total storage capacity of 840,000 cubic meters. The last two tanks with 180,000 cubic meters capacity each were installed in March 2013.

#4 – Dah-Tarn (Tatan) power station, Taiwan – 4,384MW
The 4,384MW Dah-Tarn (Tatan) power plant located in Guanyin, Taoyuan, in Northern Taiwan is the world’s fourth biggest gas-fired power plant. The gas turbine combined cycle power station is owned and operated by Taiwan Power Company (Taipower).

The plant was developed in two stages between 2005 and 2009. Stage-1 consisted of two generating units based on three Mitsubishi M501F gas turbines each. Stage-2 involved three generating units based on two Mitsubishi M501G gas turbines each.

The plant uses natural gas supplied by Taiwan’s state-owned Chinese Petroleum Corporation (CPC) which committed in 2003 to supply gas to the power plant for 25 years.

#5 – Chita thermal power station, Japan – 3,996MW
At 3,996MW installed capacity, the Chita thermal power station located in Chita, Aichi, Japan, is the world’s fifth biggest natural gas power plant. The plant, which began operations in 1968, is owned and operated by Chubu Electric Power Company.

The Chita power station currently consists of six LNG-fired units, four of which operate in combined cycle mode. The first four units, which were commissioned between 1966 and 1974 and originally designed to generate power by burning heavy crude oil, were converted for LNG-based power generation in 1985. The fifth and sixth LNG-fired units that were commissioned in 1978 as well as the first and second units of the plant were converted into combined cycle operation between 1992 and 1996.

Wait until you see what the US builds over the next 10 years while being the world’s biggest LNG exporter! EQT is a buy under $35 for a first target of $70 and a long-term hold for much higher prices.
Primary Risk:Natural gas prices fall.

Energy Fuels (UUUU – $5.40) did a webcast on the transformative Base Resources acquisition (AUDIO HERE and SLIDES HERE and TRANSCRIPT HERE). CEO Mark Chalmers said this provides a reliable, massive source of rare earth minerals to be processed into advanced rare earth materials in the US.

Click for larger graphic

Energy Fuels’ White Mesa Mill is the only facility in the USA able to process monazite and produce advanced REE materials. They have 40 years of experience processing uranium, and they’ve been the largest US producer of uranium over the last several years. They’ve accounted for about two-thirds of US production since 2017. They are ramping up uranium production to between 1.0 million and 1.5 million pounds per year by the end of 2024, with plans to increase that up to 2.0 million pounds per year. And a BIG shortage is coming:

Click for larger graphic h/t @MrChris_Timmins CEO of Pegasus Resources

UUUU is a buy under $8 for a $30 target.
Primary Risk: Uranium prices fall.

* * * * *

Your thinking you can ‘drill, baby, drill,’ but the rocks beneath us have a way of dictating their own terms Editor,

Michael Murphy CFA
Founding Editor
New World Investor

All Recommendations

Priced 10/10/24. Check out the complete Portfolio page HERE.

Buys
These are the stocks everyone needs to own because transformative events are happening over the next year or two, and I expect to hold them long-term.

Tech Dominators
  Corning (GLW – $46.03) – Buy under $33, target price $60
  Gilead Sciences (GILD – $84.67) – Buy under $80, target price $120
  Palantir (PLTR – $43.52) – Buy under $22, target price $100+
  PayPal (PYPL – $78.98) – Buy under $68, target price $136
  Snap (SNAP – $10.66) – Buy under $11, target price $17+
  SoftBank (SFTBY – $30.36) – Buy under $25, target price $50

Small Tech
  Enovix (ENVX – $11.69) – Buy under $20; 4-year hold to $100+
  First Trust NASDAQ Cybersecurity ETF (CIBR – $62.12) – Buy under $60; 3- to 5-year hold
  Fastly (FSLY – $7.24) – Buy under $14; 3- to 5-year hold to $80+
  PagerDuty (PD – $18.12) – Buy under $30; 2- to 5-year hold
  QuickLogic (QUIK – $8.94) – Buy under $10, target price $40
  Rocket Lab (RKLB – $9.39) – Buy under $13, target price $30+

$20-for-$1 Biotech
  AbCellera Biologics (ABCL – $2.50) – Buy under $6, target $30+
  Akebia Biotherapeutics (AKBA – $1.28) – Buy under $2, target $20
  Compass Pathways (CMPS – $6.05) – Buy under $20, hold a long time for a 10x return
  Editas Medicines (EDIT – $2.96) – Buy under $6 for a double in 12 months and a long-term hold to much higher prices
  Inovio (INO – $5.41) – Buy under $14, hold a long time
  Medicenna (MDNAF – $1.59) – Buy under $3, first target $20, then maybe $40
  ScyNexis (SCYX – $1.52) – Buy under $3, target price $20, then $50
  TG Therapeutics (TGTX – $21.83) – Buy under $12 for buyout at $30+

Inflation
  A Short-Sale or REO House – ($415,400) – Hold
  Bag of Junk Silver – ($31.34) – hold through silver bull market
  Sprott Gold Miners ETF (SGDM – $31.08) – Buy under $28, target price $50
  Sprott Junior Gold Miners ETF (SGDJ – $37.61) – Buy under $39, target price $100
  Sprott Physical Gold and Silver Trust (CEF – $24.68) – Buy under $18, target price $30
  Global X Silver Miners ETF (SIL – $36.30) – Buy under $30, target price $50
  Coeur Mining (CDE – $6.40) – Buy under $5, target price $20
  First Majestic Mining (AG – $6.58) – Buy under $11, next target price $23
  Paramount Gold Nevada (PZG – $0.42) – Buy under $1, first target price $10
  Sandstorm Gold (SAND – $5.83) – Buy under $10, target price $25
  Sprott Inc. (SII – $44.58) – Buy under $40, target price $70

Cryptocurrencies
  Bitcoin (BTC-USD – $59,594.91) – Buy
  iShares Bitcoin Trust (IBIT – $33.95) – Buy
  Ethereum (ETH-USD – $2,376.33) – Buy
  iShares Ethereum Trust (ETHA- $17.91) – Buy

Commodities
  Crude Oil Futures – July 2026 (CLN26.NYM – $68.19) – Buy under $70; $200+ target
  United States 12 Month Oil Fund, LP (USL – $39.15) – Buy under $40; $100+ target
  Vermilion Energy (VET – $10.09) – Buy under $11; $24 target
  EQT (EQT – $36.62) – Buy under $35; $70 first target
  Energy Fuels (UUUU – $5.40) – Buy under $8; $30 target
  Freeport McMoRan (FCX – $49.54) – Buy under $44; $65 target within two years

Holds
These are holds but not sells – yet. They could get moved back to one of the buy categories if their prices drop or outlook improves, or they could become sell recommendations in the future.
  Apple Computer (AAPL – $229.04) – Expect to move back to Buy under $175 for new iPhones
  Meta (META – $583.83) – Expect to move back to Buy under $400

Publisher: GwynRose LLC, 5348 Vegas Drive, Suite 868, Las Vegas, NV 89108

New World Investor does not act as a personal investment adviser or advocate the purchase or sale of any security or investment for any specific individual. The recommendations and analysis presented to members are for the exclusive use of members. Members should be aware that investment markets have inherent risks and there can be no guarantee of future profits. Likewise, past performance does not assure future results. Recommendations are subject to change at any time. Nothing in this presentation should be considered personalized investment advice. No communication to you by Michael Murphy or any of our employees or contractors should be deemed as personalized investment advice.

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