Is First Majestic Silver's Recent Surge Sustainable

Key Takeaways

• First Majestic Silver (AG) is experiencing a significant rally, up 11.18% today to $27.55, fueled by soaring silver prices and strong Q4 2025 earnings.
• The recent Mexican Supreme Court ruling upholding a $155 million tax liability for a subsidiary introduces a material financial risk, despite the company's ongoing legal challenges.
• While AG offers high leverage to silver's bull run, rising All-In Sustaining Costs and a new $350 million convertible note offering amplify both potential gains and downside risks.

Is First Majestic Silver's Recent Surge Sustainable?

First Majestic Silver (AG) shares are on a tear, surging 11.18% today to trade at $27.55, just shy of its 52-week high of $27.90. This impressive daily performance is part of a broader, more dramatic rally, with the stock delivering a staggering 304% return over the past year. The catalyst for today's move, and much of the recent momentum, stems from a powerful surge in silver prices, which saw futures climb 8.93% to $84.57 per ounce. This precious metals rally is further amplified by broader market uncertainty, including a recent Supreme Court ruling against Trump-era tariffs that has injected a fresh dose of volatility and safe-haven demand into the commodities market.

The company's latest financial results have also provided a strong tailwind. First Majestic reported better-than-expected Q4 2025 earnings on February 19, 2026, with an EPS of $0.3 and revenue of $0.5 billion. This positive earnings surprise, coupled with the macro tailwinds for silver, has propelled AG into the spotlight for momentum investors. Indeed, Zacks recently rated AG as a #2 (Buy) stock with a Momentum Score of A, highlighting its strong short-term price activity and industry outperformance.

However, the question for investors isn't just about past performance, but future sustainability. Silver mining stocks like First Majestic are inherently leveraged plays on the underlying commodity. While this "operational leverage" can lead to explosive gains when prices rise, it also means magnified losses if the trend reverses. The current price of $27.55 already sits above the Wall Street analyst consensus target of $25.00 and median target of $23.00, suggesting that much of the immediate upside might already be priced in, especially considering the stock's proximity to its 52-week peak.

What Does the Mexican Tax Ruling Mean for AG?

Amidst the euphoria of rising silver prices and strong earnings, a significant legal overhang persists for First Majestic Silver. On October 30, 2025, Mexico's Supreme Court of Justice of the Nation (SCJN) upheld a tax ruling against Primero Empresa Minera, a wholly-owned subsidiary of First Majestic. This unanimous decision confirmed the company's obligation to pay 2.87 billion pesos, equivalent to approximately $155 million, related to income tax and the single-rate business tax (IETU) for the 2012 fiscal year, including surcharges, updates, and fines.

This ruling is not new news, but its finality from the Supreme Court is a critical development. While First Majestic had not issued an official statement immediately following the October 30 ruling, it did provide an update on November 5, 2025, stating it was awaiting the official written decision to review the Court’s reasoning and determine its next steps. The company indicated it would consider further actions under both Mexican domestic law and international law. Crucially, First Majestic emphasized that its NAFTA arbitration proceeding, related to the nullification of an Advance Pricing Agreement (APA) for the same 2012 tax year, remains ongoing.

The $155 million liability represents a material financial burden, especially for a company with a market capitalization of $13.50 billion. While the company has options to appeal or pursue international arbitration, the immediate impact is a confirmed obligation that will likely require a significant cash outlay or provision. This adds a layer of uncertainty and potential financial strain, which could temper investor enthusiasm even amidst a booming silver market. It highlights the geopolitical risks inherent in international mining operations, where regulatory and legal battles can significantly impact a company's bottom line.

How Does First Majestic's Leverage Play Out in a Volatile Market?

First Majestic Silver's investment thesis is deeply intertwined with its operational and financial leverage to silver prices. The company's management has historically pointed to a high Beta of 2-3 times to silver, meaning a 10% move in silver can translate to a 20-30% move in the stock. This dynamic has been a primary driver of AG's impressive 304% total return over the past year, as silver prices themselves surged 137% from February 2025 to February 2026. Record production, including a 96% year-over-year surge in silver output to 3.9 million ounces in Q3 2025, has amplified this top-line growth, leading to record quarterly revenue of $285.1 million in the same period.

However, this leverage is a double-edged sword. The silver market is notoriously volatile, as evidenced by a sharp 17.5% sell-off in January and futures plunging 30% on a single day during the past year. When silver prices drop, the impact on a leveraged miner's profitability can be severe. All-In Sustaining Costs (AISC) do not fall in lockstep with metal prices. First Majestic expects its AISC to rise from $21.17 per silver equivalent ounce in 2025 to between $26.15 and $27.91 for 2026. If silver prices were to retreat significantly from their current $84.57 levels, these rising costs would quickly erode profit margins, potentially turning profits into losses.

Adding to this financial leverage, First Majestic recently raised $350 million through a convertible note offering. While this capital infusion supports growth initiatives, it also introduces dilution risk and amplifies the company's financial burden during periods of lower silver prices. The sustainability of First Majestic's expansion plans, including the new Los Gatos mine, hinges on silver prices holding above critical support levels, ideally in the $70-$75 per ounce range, to maintain healthy cash flow and margin profiles. A prolonged period of stagnant or declining prices, as seen after the 2011 silver crash where it took 14 years for the metal to reclaim its prior peak, would severely strain the company's financial health.

What Are the Key Financials and Valuation Signals?

First Majestic's recent financial performance paints a picture of robust growth, but valuation remains a point of contention. The company reported Q4 2025 EPS of $0.3 and revenue of $0.5 billion, beating expectations. For the full year 2025, realized silver prices rose 47% to $41.52 per silver equivalent ounce, with Q4 2025 seeing an even more dramatic 91% year-over-year increase to $58.96 per ounce. These figures underscore the significant impact of rising commodity prices on the company's top and bottom lines. The company also announced a quarterly dividend payment of $0.01/share, representing a modest yield of 0.08%.

Looking ahead, analyst estimates for First Majestic are somewhat mixed, with a consensus "Hold" rating from 11 analysts (4 Buy, 6 Hold, 1 Sell). The average price target is $25.00, with a median of $23.00 and a high of $30.00. With the stock currently trading at $27.55, it sits above both the consensus and median targets, suggesting that the market has already priced in much of the expected upside. Forward estimates for FY 2028-12 project revenue of $2.0 billion and EPS of $0.89, indicating continued growth if silver prices remain elevated.

Valuation models offer differing perspectives. A discounted cash flow (DCF) model by Simply Wall St indicates a fair value of CA$30.03 (approximately $22.00 USD at current exchange rates), suggesting First Majestic is slightly overvalued at its current price. Conversely, a "most popular narrative" pegs fair value at a much higher CA$120 (around $88.00 USD), based on aggressive assumptions about higher projected output (up to 30 million ounces with the Gatos acquisition) and tighter cost control (AISC of $20). This wide discrepancy highlights the speculative nature of valuing a highly leveraged commodity producer, where small changes in price or cost assumptions can lead to vastly different outcomes. Investors must critically assess the underlying assumptions behind such bullish narratives, especially given the historical volatility of silver.

What Are the Risks and Opportunities for Investors?

Investing in First Majestic Silver at its current valuation presents a classic high-risk, high-reward scenario. The primary opportunity lies in its unparalleled leverage to silver prices. If the current macro cycle of monetary uncertainty, geopolitical tensions, and supply constraints continues to drive silver higher, AG's stock could see further explosive gains. The company's aggressive expansion, including the Los Gatos mine, positions it to capitalize on increased production volume. With silver futures currently at $84.57 and a 52-week high of $121.30, there's a clear path for revenue and earnings growth if the metal retests or surpasses previous highs.

However, the risks are equally pronounced. The $155 million Mexican tax ruling, while subject to further legal action, represents a concrete financial liability that could impact cash flow. More broadly, the inherent volatility of silver is a major concern. A significant pullback in silver prices, especially if sustained, would quickly turn AG's operational and financial leverage into a crushing liability. The company's rising AISC, projected to reach $26.15-$27.91 in 2026, means its margin of safety against price drops is shrinking. Furthermore, the $350 million convertible note offering, while funding growth, adds to the debt burden and potential for shareholder dilution.

Investors should also consider the historical context of silver. Past crashes in 1980 and 2011 were followed by decades of non-recovery, with the metal taking 14 years to reclaim its prior peak after 2011. While "this time is different" is a tempting narrative, it's a dangerous assumption in commodity markets. The current price of $27.55 is near the high end of analyst targets, suggesting limited immediate upside based on current fundamentals. A "double downgrade" thesis could be triggered if silver prices fail to sustainably hold above the $70-$75 per ounce mark, which is crucial for supporting First Majestic's cash flow and margin profile.

First Majestic Silver offers a compelling, albeit volatile, proposition for investors bullish on the long-term trajectory of silver. The company's strong production growth and leverage to rising commodity prices are undeniable tailwinds. However, the significant Mexican tax liability, coupled with rising costs and the inherent risks of a cyclical commodity market, demand careful consideration. For those with a high-risk tolerance and a conviction in sustained silver strength, AG could be a rewarding, albeit bumpy, ride.

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