The new commodity cycle is underway, and typically, two items take the lead wherever the cycle is headed. Of course, these two widely watched leaders are oil and gold prices, as both are reliable fundamental and psychological indicators to show investors where the economy could be headed tomorrow. Here’s what’s making them move.
Oil prices struggled to break above $80 a barrel for some weeks, but now the commodity is moving upward. Why? Expectations of a new manufacturing sector uproar are making the energy companies ramp up production to sponsor this breakout, not to mention plenty of geopolitical conflicts that could disrupt the oil supply chain.
More than that, gold prices are now at an all-time high. These two commodities usually carry close companions, with natural gas prices typically following oil and silver going right behind gold. This is why silver prices have broken out to levels not seen since 2012 and why stocks like First Majestic Silver Corp. (NYSE: AG), Coeur Mining Inc. (NYSE: CDE), and even Pan American Silver Corp. (NYSE: PAAS) could be worthy watchlist additions soon.
Markets Recognize First Majestic Silver's Role in the Energy Transition
According to the company’s latest investor presentation, released in June 2024, silver is the best conductor of electricity, making it essential for fulfilling the hopes of an energy transition involving solar energy and electric vehicles. While some focus on uranium stocks, copper, and lithium, silver may be the best-underrated agent here.
This could be why Wall Street analysts feel comfortable forecasting up to 170% growth in First Majestic Silver’s earnings per share (EPS) for this year, standing head and shoulders above the rest of its peers in the sector. Since the stock now trades at only 68% of its 52-week high, investors have much more upside to face with this stock than meets the eye.
Consensus price targets stand at an average level of $7.5 a share for First Majestic Silver stock, which dares the company to rally 30.2% from where it trades today. Considering how bullish the price of silver is becoming, these projections seem very conservative compared to the company's EPS projections analysts have set.
But these analysts aren’t the only ones watching the stock; Van ECK Associates Corp (First Majestic Silver’s largest shareholder) just boosted its stake in the stock by 5.1% in the past quarter. This brings the asset manager’s net investment to $187.4 million today.
Coeur Mining's Premium Valuation: A Look at Investor Sentiment
There’s a reason investors are willing to pay a price-to-book (P/B) ratio of 2.2x for Coeur Mining stock today, which, compared to the rest of its peers, the company commands a premium of roughly 50%. Considering what’s happening in silver prices, momentum could be the reason.
Speaking of momentum, the stock trades at 89% of its 52-week high levels, showing investors the sentiment behind the company today. More than that, Wall Street analysts now forecast up to 287.5% EPS growth this year for the stock, leading the pack in that regard as well.
The Van ECK Associates guys couldn’t leave this one behind either in their hunt for higher silver prices; the asset manager boosted its Coeur stock by 6.5% in the past quarter, making its position as big as $145.6 million today.
According to the latest quarterly earnings report, the company reported a 14% increase in revenue for the year, helping them make these decisions. That press release also includes information on new breakthroughs made in new mines, which can help achieve the EPS projections set by analysts.
Analysts Take Note of Pan American Silver's Financial Momentum
Over the past year, Pan American Silver nearly doubled its revenues, going from $390.3 million in 2023 to $601.4 million in the first quarter of 2024. Riding on this momentum, those at Van ECK held out their most significant cash allocation for this company amongst all three on this list.
Upping their stake by 11.8% in the past quarter brought Van ECK asset managers to a net investment in Pan American Silver stock of $748.5 million today.
Like Coeur Mining stock, Pan American Silver trades at 86% of its 52-week high. This can help drive momentum traders and investors into the stock for another run higher. How much higher? Wall Street forecasts a consensus price target of $22.2 a share, daring Pan American Silver stock to rally 13.1% from today’s price.
Even if the stock takes a bit longer to reach these valuations, investors can count on the company’s annual 2% dividend yield to cushion them in the meantime.
