As inflation rises, what are the best opportunities now? First Majestic Silver (NYSE:AG) (TSE:FR) looks like an easy pick for hard times, as high consumer prices aren’t good for the economy, but they can be great for silver bulls. As we’ll discover, First Majestic is a true silver specialist, and that’s one of the reasons I’m bullish on AG stock.
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Headquartered in Canada, First Majestic Silver focuses on silver exploration and production in Mexico and the U.S. It’s fine to own physical silver, but First Majestic stock can easily fit into most portfolios, and it even pays a dividend (which you won’t get from silver bars and coins).
In case you didn’t get the message, First Majestic Silver is all about silver and even has the element symbol for silver (AG) as the company’s stock ticker. Other resource companies might dabble in multiple metals, but First Majestic puts silver first. In light of a fresh data release from the Bureau of Labor Statistics (BLS), focusing on silver may be the best possible strategy for 2024.
Is Rising Inflation Good for First Majestic Silver?
Stocks are down today, and it’s not difficult to figure out why. There’s evidence that inflation is moving up, and that’s not good news for American consumers. On the other hand, there could be indirect benefits for First Majestic Silver and its shareholders.
Here’s the rundown of the data from the BLS. The annualized increase in the U.S. Consumer Price Index (CPI) rose to 3.5% in March versus 3.2% in February. Furthermore, the print for March came in higher than the 3.4% that economists had expected, on average.
Seema Shah, chief global strategist at Principal Asset Management, observed that the hot inflation print is now a pattern rather than just an isolated incident. “This marks the third consecutive strong reading and means that the stalled disinflationary narrative can no longer be called a blip,” Shah remarked.
Now, I’m not going to pound the table and shout about a “silver super-cycle” or anything like that. However, it’s surely not just happenstance that silver moved into the green briefly today while large-cap stocks stayed in the red. Moreover, silver has been on a bull run for several weeks.
First Majestic Silver stock offers some leverage to moves in the silver price — not every single day, but over weeks and months. This makes sense, as First Majestic has access to vast quantities of silver. I’m talking about 95.9 million ounces of silver at the end of 2023, according to the company’s Measured and Indicated (M&I) mineral resource estimates.
Look back to the 1970s to see what can happen to the silver price, and therefore to silver-mining stocks like AG stock, when inflation runs high. If inflation is destructive to the dollar’s buying power, it can also be a catalyst for silver, which once traded near $50 and still has a long way to go to revisit that peak price.
First Majestic Silver: Growing Revenue and “Minting” Money
From a financial perspective, First Majestic Silver appears to be on solid ground. The company grew its revenue from $133.2 million in Q3 2023 to $136.9 million in Q4 2023. Plus, First Majestic recently ramped up its operating cash flows before movements in working capital and taxes to $36.3 million, versus just $14.1 million in the third quarter of FY 2023.
In other words, First Majestic Silver is unlikely to run out of money anytime soon. The company has been around for a long time and is highly respected in the resource community.
What does the future hold for First Majestic? If all goes according to plan, investors can anticipate dividend distributions and, hopefully, share-price appreciation. To a large extent, it all depends on the movements of the silver price. That could be a powerful price driver, though, since silver’s long-awaited breakout above $25 has been quite forceful in recent weeks.
Finally, I should mention that First Majestic Silver recently started selling bullion from its minting facility, known as First Mint. This is an interesting concept in vertical integration, with First Majestic getting the silver out of the ground and then selling some of it directly to the public. First Mint is seeking ISO 9001 certification so that its silver could potentially be eligible for inclusion in individual retirement accounts (IRAs), so stay tuned for future updates on this story.
Is AG Stock a Buy, According to Analysts?
On TipRanks, AG comes in as a Hold based on one Buy and four Hold ratings assigned by analysts in the past three months. The average First Majestic Silver stock price target is $6.33, implying 20.9% downside potential.
Conclusion: Should You Consider AG Stock?
Inflation is frustratingly persistent, and that’s problematic for the American economy. At the same time, silver could ride much higher as the dollar loses its purchasing power, and many investors can easily get leverage to silver’s price moves with First Majestic Silver stock.
First Majestic Silver is a premier, silver-focused resource company that pays a dividend and even sells silver bullion directly to the public. It’s a unique and well-respected silver producer with a solid capital position. So, I remain bullish on AG stock throughout 2024 and am strongly considering it for a share position right now.
