{"id":26036,"date":"2023-06-22T12:27:23","date_gmt":"2023-06-22T16:27:23","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/first-majestic-silver-high-risk-or-high-upside-nyseag\/"},"modified":"2023-06-22T12:27:24","modified_gmt":"2023-06-22T16:27:24","slug":"first-majestic-silver-high-risk-or-high-upside-nyseag","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=26036","title":{"rendered":"First Majestic Silver: High Risk Or High Upside? (NYSE:AG)"},"content":{"rendered":"
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Introduction<\/strong><\/h2>\n

First Majestic (NYSE:AG<\/span>) has been a poor performer, and most of its shareholders are disappointed with results. It remains in bad shape, and that’s the reason for the title. However, is this a high-risk stock or a high-upside stock? It depends on how risk averse you are and how you analyze the current situation.<\/span><\/p>\n

They have high costs, high debt, and Mexico is demanding a tax payment of around $500 million<\/span>. Ouch, that\u2019s not a pretty situation. However, read to the end to see if this is actually an opportunity.<\/p>\n

You do not need to read any further if you’re not bullish that silver prices are heading much higher. The only reason to like First Majestic is if you’re looking for a stock that offers high leverage to higher silver prices.<\/p>\n

I’m always looking for stocks that have high potential FCF (free cash flow) vs. their current FD (fully diluted) market cap. Ideally, I like to see future FCF higher than the current FD market cap. With First Majestic, their future FCF is estimated to be higher than their current FD market cap, giving them huge leverage against the silver price.<\/span><\/p>\n

The only reason they have this huge leverage is because they’re currently experiencing problems. Their FCF is very low at the moment, and they could lose money if silver prices drop. Plus, they have high debt and a Mexico tax liability. It\u2019s not a pretty picture.<\/p>\n

As the saying goes, price fixes everything. All they need are higher PM prices, and the FCF will explode.<\/p>\n

One of the reasons they’re cheap is because of their problems at their Jerritt Canyon gold mine in Nevada, which they’re currently putting into C&M (care and maintenance). These problems at JC caused the share price to crash, from which it has not recovered.<\/p>\n

JC caused many shareholders to sell and have not come back. Moreover, the experience soured many investors on First Majestic, creating a hurdle the company must climb to regain its reputation.<\/p>\n

Was JC a sign that First Majestic is a flawed company, or was it simply a mine that required more time to fix, and investors lost their patience? At some point (once gold prices rise), they will restart the JC mine and give it another try. I expect them to succeed the second time.<\/p>\n

What I like about First Majestic is that it will participate in a big way if silver runs from $30 to $50. There are not that many silver producers left, and fewer still with the leverage that they have. So, while it has high risk, it also has high upside potential.<\/p>\n

First Majestic is clearly a high-risk stock. I always like to point out that investing in PM miners is speculating<\/strong>. We’re gambling since so many things can go wrong. We’re also betting that PM prices will go much higher. If silver prices rise, then First Majestic will be in a strong position. If silver prices languish, then bad things can happen.<\/p>\n

<\/span><\/p>\n\n\n\n
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Stock Name<\/strong><\/p>\n<\/td>\n

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Symbol (US)<\/strong><\/p>\n<\/td>\n

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Type<\/strong><\/p>\n<\/td>\n

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Category<\/strong><\/p>\n<\/td>\n

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Share Price (US)<\/strong><\/p>\n<\/td>\n

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FD Shares<\/strong><\/p>\n<\/td>\n

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FD Mkt Cap (6\/21\/2023)<\/strong><\/p>\n<\/td>\n<\/tr>\n

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First Majestic Silver<\/p>\n<\/td>\n

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AG<\/p>\n<\/td>\n

\n

Silver<\/p>\n<\/td>\n

\n

Emerging Major<\/p>\n<\/td>\n

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$5.35<\/p>\n<\/td>\n

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289M<\/p>\n<\/td>\n

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$1.4B<\/p>\n<\/td>\n<\/tr>\n<\/table>\n

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