Our No.1 AI Stock Has Nothing to Do With Tech

Nvidia CEO Jensen Huang recently said AI requires "100 times more" power. We believe that means the best way to invest in AI right now has nothing to do with technology ... And everything to do with energy. One stock appears to be perfectly positioned...

Jefferies Upgrades Royal Gold For Compelling Growth Potential

Stjepan Kalinic
January 07, 2025

Investment bank Jefferies has upgraded Royal Gold Inc (NASDAQ:RGLD) to a Buy rating, boosting its price target by 16%, from $154 to $178. The bank sees compelling growth potential from the streaming and royalty business leader for precious metals.

According to Jefferies analysts, Royal Gold could see a 10% hike in year-over-year sales, accompanied by growth from mines across the Americas. The largest contributions come from North America (40% of total revenue), followed by South America (35%) and Africa (25%). Royal Gold's unique business model ensures growth without substantial capital expenditures, as operator-funded expansions increase production.

Key growth catalysts include optimization and expansion at major mining operations. Highlights include increased throughput at the Mount Milligan mine in Canada and the ongoing ramp-up at the Barrick Gold's Pueblo Viejo mine in the Dominican Republic. Both projects could significantly increase the firm's long-term revenue growth.

Royal Gold also benefits from a healthy balance sheet, allowing it to pursue new deals and further optimize its portfolio. With minimal exposure to inflationary cost pressures due to its fixed-cost streaming agreements, the company is well-positioned for the current environment.

Interestingly, Jeffries forecasts an average of $2,658 per ounce in 2025, barely above gold's opening price for the year, $2,625. Although inflation fears have subsided and gold-backed BRICS currency hasn't materialized, central bank purchases provide support, reflecting the demand for gold as a safe-haven asset.

Even Goldman Sachs, which had a more optimistic $3,000 price target for 2025, recently moved the goalpost, seeing the price reach that level in mid-2026. They pointed at fewer than anticipated interest rate cuts as the main catalyst for the outlook.

Still, beyond the commodity’s price, which constitutes the largest part of its portfolio (75% in 2025), Royal Gold has more tools for generating value for its shareholders.

The firm recently announced a 12.5% increase in its quarterly dividend, raising it to $0.45 per share and giving it a forward yield of 1.4%. The payments have steadily risen over the last decade, and with a low 27% cash payout ratio, the firm has plenty of leeway to continue the practice.

Read Next:
• Chile’s Codelco Targets Turnaround with Modest Copper Output Increase and Strategic Lithium Ventures

Photo: Shutterstock

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