On Wednesday, RBC (TSX:RY) Capital made a significant adjustment to its view on Fresnillo Plc. (LON:FRES:LN) (OTC: FNLPF (OTC:FNLPF)), elevating the stock's rating from Sector Perform to Outperform. The firm also increased the price target for Fresnillo to GBP7.00, up from the previous target of GBP4.90.
The upgrade came after observing that Fresnillo's shares had been underperforming, which resulted in the stock trading at a discount compared to its silver industry peers and at a historically low premium relative to senior gold producers. RBC Capital noted this as a key factor for their revised outlook on the company.
The firm acknowledged the challenges faced by Fresnillo, including a weak track record, a declining production profile, and a more challenging operating environment in Mexico. These factors have contributed to the erosion of the premium that Fresnillo's shares have historically commanded.
Despite these challenges, RBC Capital forecasts a potential increase of approximately 20% in Fresnillo's share price over the next year. This anticipation is based on the expectation of higher precious metals prices, which are likely to benefit the mining company.
The revised price target of 700p, up from 490p, reflects RBC Capital's confidence in Fresnillo's ability to overcome its recent underperformance and capitalize on favorable market conditions for precious metals. The firm's upgrade to an Outperform rating suggests a positive outlook for the stock's performance moving forward.
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