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Why First Majestic Silver Corp. Might Keep Losing its Luster

By Brian D. Pacampara, CFA - Feb 27, 2014 at 10:20AM

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Does this analyst make a good case? Or is it just more noise from Wall Street?

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of First Majestic Silver (AG -5.07%) slipped about 0.5% in pre-market trading Thursday after TD Securities downgraded the silver explorer from buy to hold.

So what: Along with the downgrade, analyst Daniel Earle reiterated his price target of C$15.50, representing about 24% worth of upside to yesterday's close. While contrarians might be attracted to yesterday's earnings-related pullback, Earle thinks First Majestic's forward valuation is no longer all that attractive relative to other silver miners.

Now what: According to TD, First Majestic's risk/reward trade-off is pretty balanced at this point. "Q4/13 cash costs were slightly higher than we had anticipated, while capital expenditures were in line," noted Earle. "With the company expected to generate negative free cash flow in 2014 and as it is now trading in line with its peers on our estimates, we are downgrading our recommendation to HOLD (from Buy)." Of course, with First Majestic still off about 30% from its 52-week high, that bearishness might provide resource-savvy Fools with a shiny long-term opportunity.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

First Majestic Silver Stock Quote
First Majestic Silver
AG
$7.68 (-5.07%) $0.41

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