Silver prices have been on a tear lately, reflecting a surge in industrial demand for the versatile asset. The metal's not just vital for tech and green energy, though; it's also starting to close the gap with its higher-profile cousin, gold. A peek at the silver-gold ratio tells us silver has been undervalued, but that's changing fast. As gold gets more and more expensive, with May-dated futures (GCM24) rocketing above $2,300 this week, investors looking to diversify their portfolios are rediscovering the appeal of silver. With silver for May delivery (SIK24) setting a new 52-week high of its own to close out the week, it looks like the breakout is underway - and silver's not just a sidekick to gold anymore.
With silver's star on the rise, it's worth digging into the similarly under-the-radar appeal of silver mining stocks. All three of these picks are top-rated by Wall Street analysts, with room to run higher before meeting consensus price targets.
Silver Stock #1: MAG Silver
MAG Silver Corp (MAG), a prominent player in Canada's mining sector, is strategically positioning itself as a leading silver mining company. Its flagship Juanicipio project in Mexico - a joint venture with Fresnillo Plc (FNLPF), one of the world's largest silver producers - underscores MAG Silver's ambitious vision.
The mining stock has outperformed the broader S&P 500 Index ($SPX) this year, up more than 16% since the start of the year. However, MAG still trades at a discount of about 50% to its 2021 all-time highs.
In the company's March update on its flagship project, MAG said Juancipio is on pace for production levels and operational efficiency that should generating an annual average free cash flow of over $130 million at pricing of $22 per ounce for silver and $1,750 per ounce for gold.
For the last reported quarter (Q4 2023), MAG Silver reported earnings per share (EPS) of $0.15, beating the consensus estimate of $0.13 per share. For the current quarter, analysts expect MAG Silver to report EPS of $0.12, with full-year earnings projected to rise 2% to $0.48. Looking out to fiscal 2025, Wall Street expects earnings growth of 64%.
Analysts are resoundingly bullish on the silver miner, with a chorus of “Strong Buys” echoing across the board. Notably, 8 analysts have issued a “Strong Buy” recommendation, while 3 suggest a “Moderate Buy,” and only 1 analyst recommends a “Hold.” The mean target price for MAG Silver stands at $14.75, representing a compelling 21.5% upside potential from Friday's close.
Silver Stock #2: Endeavour Silver
Endeavour Silver Corp. (EXK) isn't just another name in the mining sector; it's a company that's been making waves with its high-grade, underground silver-gold mines in Mexico. They've got a knack for turning the earth's bounty into shareholder value, and with the silver market heating up, they're in a prime position to shine.
EXK shares have climbed a hefty 43.6% since the start of the year, though it's still got room to run before testing its 52-week high, set almost exactly a year ago.
Endeavour Silver recently announced they've got the green light to start construction on their Terronera project in Mexico, thanks to snagging the final permit they needed. That signals potential growth on the horizon as they gear up to break ground in the second quarter of 2024.
But what about the numbers? Well, Endeavour Silver comfortably beat expectations with its Q4 earnings, reported in mid-March. The company reported an adjusted profit of $0.02 per share, while revenue came in at $50.5 million. That was good enough to surpass analysts' consensus estimates, which called for a loss of $0.01 per share on $49.5 million in revenue.
Analysts are pretty bullish on EXK, rating it as a “Strong Buy.” Three out of the four analysts in coverage recommend a “Strong Buy” rating, while the remaining analyst says it's a “Hold.” The mean target price for EXK, according to these analysts, is $4.11 - representing a compelling 45.2% upside potential from this week's close.
Silver Stock #3: Pan American Silver
Pan American Silver Corp. (PAAS) isn't just any silver producer; it's a $6.1 million industry heavyweight, with operations spread across the Americas. PAAS stands out for its diversified assets, solid financials, and a strong commitment to sustainability. And for those who like a little icing on their investment cake, PAAS also dishes out dividends.
Currently, the stock's quarterly dividend of $0.10 per share translates to a forward yield of 2.40%. PAAS has grown this dividend consistently for four years.
Pan American Silver stock is up just over 7% on a YTD basis, and set a new 52-week high in Friday's session.
On the strategic front, PAAS has been making some bold moves. In February 2024, they announced an investment of $25-26 million in the La Colorada mine in Mexico, aiming to boost silver production and extend the mine's life by a decade.
Financially, PAAS fell short of EPS estimates in February's Q4 report, as the miner swallowed a per-share loss of $0.04 - even as revenue of $669.6 million beat expectations by a wide margin. The forecast is brighter for the full year, though; Wall Street is targeting a fiscal 2024 profit of $0.41 per share, more than triple last year's EPS of $0.12.
Analysts are pretty bullish on PAAS, with 7 out of 9 analysts offering a “Strong Buy” recommendation, 1 suggesting a “Moderate Buy,” and 1 analyst recommending a “Hold.” The mean target price hovers around $20.09, suggesting 14.6% potential upside.
The Bottom Line on Silver Mining Stocks
So, there you have it – three shining stars in the silver mining sector that are catching the eye of savvy investors. MAG, EXK, and PAAS are all getting the thumbs-up from analysts, too, with those coveted “Strong Buy” ratings. With silver prices climbing, investors looking to add some exposure to the breakout metal might want to consider these top names in the industry.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
