What happened
Silver stocks are looking a lot more lustrous in investors' eyes this week. Reporting strong production, Hecla Mining (HL 1.19%) and Endeavour Silver (EXK -0.36%) gave metals-minded investors something to cheer, while an analyst's more bullish opinion of the stocks also contributed to the market's enthusiasm. Pan American Silver (PAAS 0.26%), on the other hand, didn't have specific company news to report. Instead, like Hecla Mining and Endeavour Silver, it benefited from the uptick in silver prices.
From the close of trading last Friday to the end of yesterday's trading session, shares of Hecla Mining have climbed 16.2%, while Endeavour Silver and Pan American Silver have soared 18% and 9.6%, respectively, according to data provided by S&P Global Market Intelligence.
So what
In a second-quarter update, Hecla reported that in the first half of 2023, it achieved a 13% increase in silver production compared to the same period in 2022, while lead production and zinc production grew 9% and 3%, respectively.
Based on the company's strong year-to-date performance, management forecast 2023 silver production of 17 million ounces, and it reaffirmed its 2025 silver production forecast: 20 million ounces.
With Hecla Mining's success at growing silver production, H.C. Wainwright has adopted a more bullish opinion on the stock. The firm's analyst, Heiko Ihle, raised the price target on Hecla to $10 from $8.25. Based on yesterday's closing price of $5.94, Ihle's price target implies upside of 68%.
Due to strong performance at its Guanaceví mine in Mexico, Endeavour Silver reported a 10% year-over-year increase in silver production for the second quarter. As a result, management reaffirmed 2023 production guidance of 8.6 million to 9.5 million silver equivalent ounces. The company also succeeded in growing its production of gold by 6% in the quarter versus a year ago.
As with Hecla Mining, Wainwright's Ihle sees Endeavour Silver's stock as an increasingly glittering opportunity. On Wednesday, he raised the price target to $8 from $5.50. Ihle recognizes considerably more upside in Endeavour than he does with Hecla: That price target implies upside of 176% from Tuesday's closing price of $2.90.
With the strong correlation between the changing price of silver and the movement in silver-related stocks, it's no surprise that shares of Pan American Silver jumped this week despite the company failing to report any news. Silver rose steadily throughout the week from about $22.72 per ounce last Friday to $24.26 yesterday.
Now what
While news that Hecla Mining and Endeavour Silver achieved growth in second-quarter metals production is encouraging, it's important for those who are weighing whether to buy the stocks to not solely focus on this data point.
An increase in metals production means little if it's coming at a substantially higher cost. Therefore, potential investors will want to check in with the companies when they report quarterly earnings to see if the growing metals production was overshadowed by higher production costs.
This, in turn, can provide greater context for the analyst's bullish price targets -- something that investors should be skeptical of regardless, considering how analysts often have shorter investing horizons than the long-term holding periods we prefer.
