A-Mark Precious Metals: Buy The Dip With Gold At All-Time High

Core Viewpoint - A-Mark Precious Metals, Inc. (NASDAQ:AMRK) has faced challenges with its stock price remaining stagnant despite rising gold prices, but current weaknesses may present a buying opportunity as the company consolidates market share and prepares for potential growth in the precious metals market [2][10]. Financial Performance - A-Mark reported fiscal 2024 Q2 results with GAAP EPS of $0.57, missing estimates by $0.22, while revenue reached $2.1 billion, a 6.7% year-over-year increase but also below expectations [4]. - Key financial metrics for A-Mark show a significant decline in earnings before interest, taxes, depreciation, and amortization (EBITDA) by 50% year-over-year, with gross profit margins at 2.2% [6][9]. Market Dynamics - The market premiums for gold and silver have narrowed significantly due to increased supply and lower demand, impacting the company's gross margins and necessitating adjustments in pricing strategies [6][9]. - Despite lower wholesale volumes, the number of active retail customers has increased by 29% year-over-year, indicating a potential for future growth [7]. Strategic Initiatives - A-Mark is pursuing growth through acquisitions, including the recent purchase of I.PM Group Limited to enter the Asian market and the acquisition of the "Gold.com" domain to enhance its online presence [7][8]. - The company is also adding inventory at opportunistic prices to position itself favorably for future market conditions [7]. Long-term Outlook - The long-term outlook for A-Mark is considered strong due to its expanded global footprint and the potential for increased investor demand as gold prices rise [10]. - The company is expected to benefit from favorable U.S. Federal Reserve policies and ongoing geopolitical risks that support higher precious metals prices [10]. Stock Performance - A-Mark's stock is currently above its lows from late 2023 and has technical support around $25.00, suggesting potential for recovery in 2024 [12]. - The company is rated as a buy with a price target of $40.00, reflecting an 8x multiple on projected fiscal 2025 EPS of $5.14, contingent on the expansion of physical premiums for gold and silver [14].