With the trade war in full bloom, Wheaton Precious Metals (NYSE:WPM) makes an awfully compelling case for concerned investors. Unlike traditional miners, Wheaton specializes in the streaming business model. Rather than engaging in the extraction and refinement of valuable commodities, streaming firms provide upfront capital to miners in exchange for the rights to future production.
With the SPDR Gold Trust (NYSEARCA:GLD) ripping higher since late 2023, pure-play miners may offer the greatest upside potential. Nevertheless, in my opinion, there’s plenty of room for an asset like WPM stock. For one thing, Wheaton provides risk mitigation and stability. By securing metals at fixed, below-market prices, the company minimizes exposure to operational risks, such as cost overruns.
To be sure, risk mitigation doesn’t come for free. While Wheaton provides a strong measure of confidence for investors, outright return potential can be limited. So far, though, this dynamic hasn’t bothered stakeholders of WPM stock. Right now, gold miners are lagging the underlying asset due to macroeconomic challenges crimping profitability.
Another factor that can’t be ignored is the dividend. With a forward yield of 0.85%, Wheaton isn’t exactly the most generous player. However, the payout ratio is minimal at 32.55%. It also means that as WPM stock rises in conjunction with the fear trade — essentially cynical catalysts that buttress the price of gold — investors are getting a little extra bonus.
Again, it’s not much but it’s better than nothing.
Plus, the valuation of WPM stock seems reasonable, all things considered. At this moment, shares trade hands at 27.11X trailing-12-month (TTM) sales. Notably, analysts anticipate fiscal 2025 revenue to hit $1.64 billion, up almost 28% from the prior year. If so, WPM would be trading at 20.21X forward sales.
One year ago, Wheaton stock was priced at 21X revenue. With cynically improving fundamentals, WPM stock has a realistic chance of marching higher.
Generally speaking, Wheaton arguably offers a compelling, long-term investment idea. As tech firms and other growth-centric names collapse under the weight of the Trump administration’s tariffs, there have only been a few standout sectors. Gold is one of them, with WPM stock representing a sterling individual player.
For those who are unsure about the streaming giant, the numbers game may offer some confidence. Using pricing data from January 2019 onward, a long position held for any given eight-week period has a 57% chance of being profitable. Those are pretty good odds.
However, when WPM stock enjoys modest momentum, FOMO or the fear of missing out kicks in. Right now, WPM has gained over 3% in the trailing five sessions. After WPM returns up to 5% over a one-week period, the long odds over the next eight weeks lands at 58.54% — a small but noticeable improvement over the baseline.
For those who want to take an extreme risk, speculators may consider 72/75 bull call spread expiring March 28. At time of writing, this trade calls for a cash outlay of $180 for the chance to earn a maximum of $120, or a payout of nearly 67%.
This trade will be fully successful if WPM stock rises to $75 or above at expiration. Statistically, under similar circumstances, WPM would be expected to return around 4.95%. That would put a price target of just under $76.
