Stock Analysis & Ideas

Can First Majestic Silver Stock (NYSE:AG) Restore Its Shine?

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AG stock got clobbered by financial traders, but was the share-price drawdown justified? Probably not, as First Majestic Silver is still an active silver producer and a buyer of its own shares.

First Majestic Silver (NYSE:AG) certainly isn’t in favor among investors right now, but I believe AG stock will shine again and that patient shareholders will be rewarded. I am bullish on First Majestic Silver stock because the seemingly bad news about the company isn’t really all that bad, and the company’s share repurchases signal First Majestic’s confidence.

Canada-headquartered First Majestic Silver is among the best-known silver miners in North America. The company also mines for gold, but its name makes it crystal-clear that First Majestic is, first and foremost, a silver producer.

Silver is actually up over the past couple of weeks, having rallied from $20 to $22 as investors seek safe havens during the recent banking crisis. Consequently, AG stock should be firmly in the green, but it’s actually falling fast. So, let’s find out what traders are so worried about and consider whether First Majestic Silver stock is likely to recover.

First Majestic Silver Suspends Activity at a Mine

The news item that sent AG stock down 24% on Tuesday, even while the rest of the stock market was rallying, was that First Majestic Silver suspended activity at one of its mines. At first glance, this might seem like terrible news. However, it’s certainly not the end of the road for First Majestic.

Most likely, many traders only read the headline and didn’t delve into the details. First Majestic Silver announced that it’s “temporarily suspending all mining activities and reducing its workforce at Jerritt Canyon.” The key word here is “temporarily.” There’s no indication that First Majestic will permanently lose the Jerritt Canyon as a revenue source.

First Majestic Silver acknowledges that it’s suspending activity at Jerritt Canyon as a cost-cutting measure. Plenty of companies are slashing their workforces and halting some of their operations in order to reduce costs. It’s a necessary measure during a time of high inflation and economic uncertainty.

Furthermore, First Majestic Silver President and CEO Keith Neumeyer made it crystal-clear that he’s eager to resume activity at Jerritt Canyon at some point. He assured that First Majestic “will continue exploring both near-mine and prospective regional greenfield targets to grow Jerritt Canyon’s resources, which we believe will significantly enhance the economics for the eventual restart of operations.”

Additionally, it should be noted that Jerritt Canyon is only one of four major properties for First Majestic Silver. The other three are the San Dimas Silver/Gold Mine, the Santa Elena Silver/Gold Mine, and the La Encantada Silver Mine. Therefore, it appears that short-term stock traders are overreacting to the temporary suspension of activity at Jerritt Canyon.

An Active Silver Producer That Buys Its Own Shares

The news about Jerritt Canyon shouldn’t cloud investors’ judgment about First Majestic Silver’s future prospects. The company has demonstrated that it’s a highly active silver miner. Plus, First Majestic buys its own shares, and that’s definitely a good sign.

Before you get nervous about Jerritt Canyon, consider this: First Majestic Silver reported record production in 2022 of 31.3 million silver equivalent ounces, up 16% year-over-year. This, without a doubt, helped First Majestic achieve a record annual revenue figure of $624.2 million, up 7% year-over-year.

Moreover, First Majestic Silver just renewed its share-repurchase program. So, starting on March 22, First Majestic can buy back as many as 5 million of its own shares during the next 12 months. It’s unknown how many of its stock shares First Majestic will actually buy over the next year. However, the company probably wouldn’t renew its share-repurchase program unless it planned to buy some shares. This signals management’s confidence in the company’s financial and operational well-being.

Is AG Stock a Buy, According to Analysts?

Turning to Wall Street, AG stock comes in as a Hold based on one Buy and three Hold ratings. The average First Majestic Silver stock price target is $8.54, implying 50.8% upside potential.

Conclusion: Should You Consider AG Stock?

Admittedly, First Majestic Silver doesn’t have many Buy ratings on Wall Street at the moment, and AG stock is tumbling fast. On the other hand, the company has demonstrated its ability to grow its revenue and actively mine for silver, the price of which has gone up recently.

Hence, my contrarian instincts are telling me that this is a good time to consider a position in First Majestic Silver. At the very least, investors should monitor the silver price, keep tabs on First Majestic’s share buyback activity, and prepare for a potential turnaround in AG stock.


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