Please ensure Javascript is enabled for purposes of website accessibility

Why Hecla Mining Stock Jumped 10% Today

By Rich Smith - Jun 7, 2019 at 4:53PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There's a nugget of good news in recent analyst price-target cuts.

What happened

Shares of gold and silver miner Hecla Mining (HL 5.88%) gained nearly 10% in early trading Friday before subsiding to about a 2.1% gain in the waning minutes of trading. The leap may have something to do with a pair of analyst reports that have come out on Hecla over the past two days.

So what

This morning, Merrill Lynch reiterated an underperform rating on Hecla stock, and cut its price target to just $1.55 per share. This followed a price target cut to $1.75 per share from Cantor Fitzgerald on Thursday.

With less than $12 million in cash weighed against nearly $550 million in long-term debt, and free cash flow now negative and becoming more so by the hour, Cantor called Hecla's financial situation "dire" -- although at recent prices, the analyst is maintaining a neutral rating on the stock.

Gold nugget

Image source: Getty Images.

Now what

For its part, Hecla says it is taking steps to remedy its poor financial state, cutting $25 million in expenses this year, and curtailing investments in its Nevada operations that "have not generated the cash flow we had hoped for."

Capital expenditures for the year are still expected to be about $138 million, however, and that's more than the amount of operating cash currently flowing into the business. So getting back to free cash flow this year could be difficult. This means debt problems will linger, weighing on the stock.

That being said, both analysts -- negative on the stock though they might be -- seem to think that Hecla stock is worth more than the $1.50 or so it currently costs. If that's the worst the bears can say about Hecla, it's no wonder investors are getting optimistic.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Hecla Mining Company Stock Quote
Hecla Mining Company
HL
$4.68 (5.88%) $0.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
327%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.