First Majestic's Q4 Production Surge Highlights Operational Gains but Amplifies Valuation Risks

What happened

First Majestic Silver reported a 37% year-over-year increase in Q4 2025 silver-equivalent production to 7.8 million ounces, fueled by contributions from the Gatos Silver acquisition and strong performance at core mines. This extends a trend of robust operational execution, with the company having previously raised its 2025 guidance to 30.6-32.6M AgEq oz. However, the DeepValue master report assigns a 'STRONG SELL' rating, citing extreme valuations at ~127x P/E and ~81x EV/EBITDA that assume sustained silver price strength. The report warns that silver market deficits are expected to narrow, with prices potentially normalizing to mid-$30s/oz, which could trigger significant multiple compression. Thus, while production growth is positive, it does not address the underlying overvaluation and crowded momentum in the stock.

Implication

The Q4 output jump confirms AG's operational turnaround but reinforces the DeepValue report's warning that current valuations embed unrealistic silver price assumptions. Any retreat in silver toward forecast levels could rapidly erode AG's earnings multiples, given its high leverage to metal prices and elevated capex needs. The report's base case implies a ~25% downside to $15/share, assuming partial silver normalization and mid-single-digit volume growth, which outweighs the near-term production gains. Key catalysts to monitor include 2026 guidance, updated Silver Institute deficit data, and the market's reaction to any shifts in silver sentiment. Therefore, new capital at current levels is unattractive, and existing holders should consider trimming exposure to mitigate downside from a potential re-rating.

Thesis delta

The production news does not shift the bearish thesis; it may even exacerbate valuation risks if growth expectations are already fully priced in the stock. The core concern remains the disconnect between AG's lofty multiples and the plausible silver price scenario over the medium term, with the report's 'STRONG SELL' rating reaffirmed by this operational update.