Gold prices steady ahead of Fed decision; weekly weakness noted
On Thursday, RBC Capital Markets adjusted its stance on Fresnillo Plc (LON:FRES:LN) (OTC: FNLPF (OTC:FNLPF)), a leading silver and gold mining company with a market capitalization of $8.5 billion. The firm’s analyst, Marina Calero, downgraded the stock from Outperform to Sector Perform, while simultaneously increasing the price target from GBP8.10 to GBP8.80. According to InvestingPro data, the company maintains strong financial health with a "GREAT" overall score.
Calero noted that Fresnillo had outperformed its silver peers significantly, with InvestingPro data showing an impressive year-to-date return of 47.71% and a remarkable 93.9% gain over the past year. This surge was attributed to a combination of strong price and operational momentum, along with a weakening Mexican Peso, which is beneficial for the Mexico-based miner. InvestingPro Tips indicate the stock is currently trading in overbought territory and near its 52-week high of $11.74.
The RBC Capital analyst acknowledged the potential for Fresnillo’s margins to expand in the next two years, which could lead to further re-rating. However, Calero believes that the upside may now be more limited after the recent strong performance of the stock.
In the comparative landscape of silver mining companies, RBC Capital sees more attractive risk-reward profiles in other businesses. The firm highlighted Coeur Mining (NYSE:CDE), Hochschild Mining (LSE:HOC), and Pan American Silver (TSX:PAAS) (NASDAQ:NYSE:PAAS) as having better prospects within their coverage.
The price target adjustment to 880p from 810p reflects a modestly more optimistic outlook for Fresnillo’s financial performance, despite the downgrade in the overall rating from Outperform to Sector Perform. This change indicates a shift in RBC Capital’s expectations for the company’s stock, suggesting that while Fresnillo may continue to perform well, other opportunities in the silver mining sector may offer greater potential returns.
In other recent news, Fresnillo Plc has captured attention with significant financial developments. The company’s fiscal year 2024 results, released earlier this month, showed improved financial performance driven by strong precious metal prices and effective cost control measures. Following these results, Berenberg upgraded Fresnillo’s stock rating from Hold to Buy and increased the price target to £10.20, emphasizing the company’s operational stability and potential for shareholder returns through special dividends. Meanwhile, JPMorgan maintained an Overweight rating with a GBP10.00 price target, highlighting a substantial dividend payout and Fresnillo’s commitment to reducing production costs. The firm anticipates potential EBITDA upgrades for 2025 and 2026, influenced by the ongoing uptrend in gold and silver prices and the depreciation of the Mexican Peso. JPMorgan also projects that Fresnillo will achieve a net cash position by the end of 2025, with a free cash flow yield of around 12% for that year. Both Berenberg and JPMorgan’s analyses reflect a positive outlook on Fresnillo’s ability to navigate market conditions and enhance shareholder value.
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