The Insider Report - October 27th, 2024

Your Exclusive Benzinga Insider Report

(DO NOT FORWARD)

By analyst Gianni Di Poce
Volume 3.43

Market Overview (Member Only)

• The Nasdaq finally hit a new all-time high, and was the only index in positive territory as it finished up 0.16% on the week. The Dow Jones Industrial Average was down 2.68% on the week, while the S&P 500 fell by 0.31%.
  
• Tesla captured the headlines with an almost 22% rally on the week after a strong earnings report.
  
• Cryptos are still coiling nicely, and I think tech's resurgence is only getting started.
  
• Big week ahead, with key earnings reports from big tech along with inflation and employment reports.

Stocks I Like

Argenx (ARGX) – 33% Return Potential

What's Happening

• Argenx (ARGX) develops various therapies for the treatment of autoimmune diseases across the world.
  
• The company brought in $1.27 billion in revenue in 2023, but still lost $295.05 million on the year.
  
• ARGX has an elevated valuation, especially considering it's not profitable right now. Its Price-to-Sales is at 20.48 and its Book Value is 71.28.
  
• From a technical perspective, ARGX broke out from a saucer formation back in the summer. It consolidated its gains and looks like it's attempting for its next leg higher.

Why It's Happening

• Following FDA approval on June 21st, Argenx has already begun treating chronic inflammatory demyelinating polyneuropathy (CIDP) patients with VYVGART Hytrulo. This rapid market entry showcases the company’s operational efficiency and the potential for additional revenue streams.
  
• Argenx reported sales across multiple regions, including $407 million from the United States, $20 million from Japan, $35 million from Europe, the Middle East, and Africa (EMEA), and $14 million from China. This diverse geographical footprint reduces market risk and opens up new growth opportunities.
  
• The company is on track to initiate four new registration trials by the end of 2024, demonstrating its commitment to expanding its product portfolio and addressing unmet medical needs.
  
• Argenx’s expanded partnership with Monarch for implementation and customer success services demonstrates the company’s commitment to improving operational efficiency and customer satisfaction1. These collaborations could lead to enhanced market penetration and customer retention.
  
• Argenx reported total operating income of $489 million in Q2 2024, a 20% increase from the previous quarter.
  
• The company achieved $478 million in product net sales for Q2 2024, attributed solely to myasthenia gravis (MG) patients. This significant figure highlights the strong demand for Argenx’s flagship product, VYVGART, and its growing market penetration.

Analyst Ratings:

• Citigroup: Buy
• Guggenheim: Buy
• JP Morgan: Overweight

My Action Plan (33% Return Potential)

• I am bullish on ARGX above $484.00-$489.00. My upside target is $740.00-$750.00.
  

Uranium Energy Corporation (UEC) – 80% Return Potential

What's Happening

• Uranium Energy Corporation (UEC) engages in the exploration and extraction of uranium and titanium concentrates.
  
• The company brought in $224k in revenue in its 2024 fiscal year and lost $29.22 million on the year.
  
• UEC has a sky-high valuation. Its Book Value is 1.89 and its forward P/E is 93.45.
  
• At a technical level, UEC is attempting a breakout from a broadening wedge formation. If successful, it could lead to an explosion higher in prices.

Why It's Happening

• UEC has restarted ISR uranium production in Wyoming, signaling a new era of growth. The company’s Christensen Ranch project began sending uranium-loaded resin to the Irigaray Central Processing Plant in August 2024, marking a significant milestone in UEC’s production capabilities.
  
• Global demand for nuclear energy is surging, as evidenced by tech giants like Google and Amazon inking power purchase agreements for nuclear-generated electricity. UEC’s position as a key uranium supplier puts it at the forefront of this growing market.
  
• U.S. and European Union bans on Russian uranium, coupled with Russia’s signaling of future export restrictions, emphasize the need for reliable domestic supply chains. UEC’s focus on North American uranium production positions it as a critical player in meeting Western nuclear fuel supply requirements.
  
• The company’s unhedged position in the uranium market offers investors pure exposure to rising uranium prices. With spot prices reaching $80/lb, UEC is poised to capitalize on the bullish market conditions without any price ceilings.
  
• UEC’s robust balance sheet, with $331.5 million in cash, equity holdings, and inventory at market prices as of July 31, 2024, provides a strong foundation for future growth. This financial strength allows the company to rapidly expand and develop its U.S. ISR production platforms and Canadian assets.
  
• UEC is a candidate for a short squeeze with over 14% of its floated shares being sold short.

Analyst Ratings:

• Roth MKM: Buy
• HC Wainwright: Buy

My Action Plan (80% Return Potential)

• I am bullish on UECabove $6.50-$7.00. My upside target is $14.00-$15.00.

Marathon Digital Holdings (MARA) – 80% Return Potential

What's Happening

• Marathon Digital Holdings (MARA) is a digital asset technology company.
  
• The company generated $387.51 million in revenue in 2023 along with $261.17 million in earnings.
  
• MARA has a reasonable valuation. Its P/E is at 20.79, its Price-to-Sales is at 8.09, and its EV to EBITDA is at 8.88.
  
• From a charting standpoint, MARA is pressing up against resistance of a rounding bottom formation. If it clears, look out above, this thing could break big time.

Why It's Happening

• Analyst optimism supports the bullish outlook for MARA stock. Macquarie and Cantor Fitzgerald have initiated positive coverage with price targets above $20, reflecting confidence in the company’s growth prospects and market position.
  
• Continued growth in Bitcoin production demonstrates operational excellence. MARA reported a 5% increase in Bitcoin production for September 2024, showcasing the company’s ability to consistently improve its mining operations and capitalize on market opportunities.
  
• Positive momentum in the broader cryptocurrency market creates a favorable environment for MARA. With Bitcoin recently surpassing $67,000, the company is well-positioned to benefit from increased investor interest in crypto-related stocks and potential further appreciation in Bitcoin’s value
• Impressive Bitcoin production growth signals MARA’s expanding market dominance. The company produced 2,811 BTC in Q1 2024, a 28% increase from Q1 2023. This substantial growth in Bitcoin production highlights MARA’s operational efficiency and its potential to generate significant value for shareholders as Bitcoin prices continue to rise.
  
• Record-breaking Q1 2024 financial results showcase MARA’s explosive growth potential. Revenues surged 223% year over year to $165.2 million, while net income skyrocketed 184% to $337.2 million.
  
• MARA is a candidate for a short squeeze with over 28% of its floated shares being sold short.

Analyst Ratings:

• JP Morgan: Underweight
• HC Wainwright: Buy

My Action Plan (80% Return Potential)

• I am bullish on MARAabove $16.00-$17.00. My upside target is $32.00-$33.00.

Market-Moving Catalysts for the Week Ahead

An Action-Packed Week Ahead
Over the next couple of weeks, I think we are entering a period with the most elevated headline risks in months. Not only are we in peak earnings season now, with household names like Apple, Meta, and Alphabet set to release their latest results this week, but there's also a slew of labor and inflation data this week that could be very critical for bond markets, which will ultimately trickle down into stocks.

The big thing to watch in the unemployment numbers is for an uptick in the unemployment rate. This could make the Fed more dovish going into the next meeting on November 7.

When it comes to inflation this week, we have the PCE report, which is the personal consumption expenditures. The Fed loves this report because it allows for the substitution of goods and services. I don't expect this to come in hot because commodity prices are still contained for now.

The Housing Pause
I think we've been reminded just how sensitive to interest rates the housing market is when it comes to demand. Over the last few weeks, the 30-Year mortgage rate jumped back above 7%, and in response, existing home sales for September didn't surprise to the upside.

We did see, however, new home sales in September come in well-above estimates. It seems that the new home market continues to provide buyers better incentives when it comes to obtaining lower rates on housing.

This week, we have the Case-Shiller home price index for the previous quarter. This housing index has showed a slow and steady increase in prices, even with rising rates. We'll see if the trend continues but I still expect 2025 to be bullish for real estate due to falling interest rates.

What the Dollar's Bid Means
In simplest terms – the world wants a piece of the U.S. action. But there is a fine-lining to all of this, and there may be a geopolitical element to this all as well. It has to do with the strategic geographic placement of the United States.

The geopolitical tensions around the world are very elevated at the moment, and as a rule, global capital does not have war or military conflict. Both Europe and Japan, home to the two second-largest currencies outside of the U.S. Dollar, are on the front doorstep of two major military flashpoints: Ukraine and Taiwan.

If global capital is sniffing out a conflict escalation, it's going to help the Dollar. But there's also the pure economic component too. If the U.S. economy is doing better than everyone else, then people want a piece of the action. Remember to buy U.S. stocks or bonds from abroad, you need to buy Dollars first.

Musings for 2025
We're about to finish the first month of the fourth and final quarter of 2024, which means that our attention is now on potential themes of Q1 and Q2 2025. The presidential inauguration takes place in January, so political risks cannot be ruled out entirely.

It's not something that I take pleasure in writing about, but let's be real – there could be tangible ramifications for your portfolio. Remember that global capital likes rule of law above all else, for that is the best environment for commerce to flourish.

I think markets may surprise people with their resilience in 2025. I'm still keen on interest rates coming down into next summer, and if this unfolds, it should end up as a major tailwind for important market sectors like technology.

Sector & Industry Strength (Member Only)

It was a real battle of the bulls last week, but I'm happy to report that the developments in the sector leadership rankings are largely positive. We've seen communications (XLC) overtake utilities (XLU) as the top-performing sector year-to-date, which is a risk-on development.

We've also seen technology (XLK), the market's largest and most important sector, climb a spot and back into fourth place last week. This is a very bullish development and signals that stocks could still have more upside near-term.

Energy (XLE) is back in last place, and signals that inflation is largely contained. Interestingly, the bond market seems to have a different view, as I'll show below. Consumer discretionary (XLY) also finally overtook consumer staples (XLP) last week, which is a very bullish sign.

1 week	3 Weeks	13 Weeks	26 Weeks
Consumer Discretionary	Financials	Utilities	Utilities

Editor's Note: Consumer discretionary popping into one-week leader (thank you Tesla) is not a bearish sign.

Gold-Silver Ratio Showed the Way (Sector ETF: GLD/SLV) 
Now that the investment community is fully caught onto the trend in precious metals, it's an appropriate time to revisit the ratio between gold (GLD) and silver (SLV). It's built a huge technical base over the past couple years, which may be on the verge of a resolution.

To be clear, in a real precious metal bull market, silver (SLV) will outperform gold (GLD) on a percentage basis. It's when gold is outperforming silver that caution is warranted in the precious metals space, but we're not seeing that now.

The inverted saucer formation on this chart below implies that there could still be much more upside in silver compared to gold. I think gold could go to $2,800-$3,000, but when it comes to silver, a simple retest of its former all-time highs in the $48-$50 zone could confirm the signal this ratio is providing.

Energy Wars (Sector ETF: URA/XLE)
Big changes in energy policy are coming, and I don't think it has only to do with the upcoming election. If you aren't aware already, artificial intelligence requires substantially more power than traditional internet search engines, and it's going to have to come from somewhere.

Currently, the best technology available to power the artificial intelligence revolution is nuclear. This chart looks at the ratio between the nuclear energy sector (URA) against the traditional energy sector (XLE).

A massive rounding bottom formation is present on the ratio chart, and it looks like a breakout is starting in favor of URA over XLE. If this breakout takes, I would look for the uranium sector to emerge as a major leader in 2025.

Bonds Worried About Inflation (Sector ETF: TIP/IEF)
When it comes to macroeconomics, I really only care what the currency and bond market have to say. All the economic data and punditry in the world pale in comparison to the markets where central banks and institutions play the most.

It's time to have another look at one of the most important inflation ratios in this market – the one between Treasury Inflation Protected Securiteis (TIP) and 7-10 Year Treasuries (IEF). Remember, when TIP outperforms and the ratio rises, it means that inflationary pressures are creeping higher.

The ratio appears to be breakout from the descending triangle formation. These are continuation patterns, which means they often resolve in the direction of the underlying trend. Although inflation has slowed, the trend in this ratio never turned downward.

Editor's Take: Over the past few months, I warned that the Fed's return to easing and money printing would create some major inflationary problems, and right now, it looks like it may only be the beginning.

To be clear, I don't think we're about to see prices skyrocket near term. Crude oil and other commodities are still too contained. But the stage is being set where another wave of inflation could come in 2025.

It's very important to keep an eye on this ratio in the coming weeks and months. If the April high is exceeded, it would be a very strong sign that inflation is making a comeback. And the market didn't like when it was running rampant in 2022.

Cryptocurrency
Back to looking at Ethereum this week, and the technical setup is becoming increasingly
compelling. The risk-reward profile looks especially attractive at current levels, with ETH
pressing against the upper boundary of its recent trading range. A decisive break above the
$2,900-$3,100 zone could trigger an explosive move higher, potentially targeting the previous
swing highs above $3,400.

Also, Ethereum is starting to show relative strength compared to other major cryptocurrencies,
much like silver often leads gold in precious metals markets. If this technical setup plays out as
anticipated, we could be looking at the early stages of a significant trend change. However, as
with any crypto position, proper position sizing remains crucial given the asset class’s inherent
volatility.

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