First Majestic's $252 Million Q2 EBITDA Suggests AG May Still Be Undervalued

Q2 margins, not just silver prices, are driving the thesis

First Majestic's second quarter was strong enough to test whether the market is giving enough credit for current cash generation. The company produced Q2 EBITDA of $252 million, up 110% year over year, with a 61% EBITDA margin. Even after the recent move, AG closed at $17.52 and remains near the top of its 52-week range.

That combination is the core of the debate. The business is producing much more cash than a typical sentiment-driven silver name, yet the stock still trades with the hangover of a commodity cycle rather than the confidence of a proven cash generator.

Why the valuation gap may be behavioral

Investors in metal stocks often discount strength near highs. They forgive weaker fundamentals at low prices, but they remain quick to treat strong fundamentals as temporary when macro risks are fresh. That helps explain why AG can deliver a major earnings beat and still trade as if the market is waiting for confirmation.

First Majestic is entering the next earnings cycle with revised-up 2026 silver and gold guidance and a treasury position at quarter-end was $1.25 billion. If silver holds, the market may need to pay more for cash flows it has been treating as cyclical noise.

The leverage story is in margins, not just ounces

The real question is not whether First Majestic had a good quarter. It is whether the quarter explains how silver strength turns into durable earnings power.

Higher silver prices are stretching the cash-flow wedge

Q2 revenue reached $416 million, EBITDA margin was 61%, and free cash flow totaled $195 million. First Majestic also produced 3.8 million silver ounces in the quarter, only a 3% Y/Y increase. The key point is that cash generation grew much faster than production.

That is classic operating leverage. When revenue rises with metal prices and costs do not move one-for-one, each additional dollar of silver sales opens a much larger cash-flow wedge. AG does not need heroic volume growth to rerate; it needs supportive silver prices and reasonably controlled costs.

The operating base looks stronger than one quarter

First-half silver production was 7.3 million ounces, or 50% of revised annual guidance, and 2026 guidance was later revised up by 10% for silver and 7% for gold. That makes the quarter look less like a one-off and more like a step up in operating performance.

Mine-level results also support that view. Q2 silver output benefited from La Encantada and Santa Elena, while Santa Elena added infill drilling results and secured construction permits for the Santo Niño and Navidad portals. That points to better current output and a more tangible path to incremental tons later on.

What the market is still weighing against the upside

The bear case is not weak; it is narrower than the bull case. all-in sustaining costs impacted by inflation and large workforce bonuses tied to silver prices remain a watchpoint, as does uncertainty around tax settlement in Mexico and future capital needs for Jerritt Canyon. Those are reasons to monitor durability, not proof that the leverage story is broken.

Santa Elena is extending the value pool beyond current output

The most meaningful change is that Santa Elena is moving from a strong current contributor toward a district with multiple near-term ore sources.

Permits and planned spend make the pipeline more concrete

First Majestic secured construction permits for the Santo Niño and Navidad portals earlier this month and announced an additional $12 million in investments planned in 2026 to advance underground access and position Santo Niño for near-term mining. On the earnings call, management outlined first blast around Aug. 15, with first ore from Santo Niño expected by end of 2027 and Navidad about 15 months later.

That matters because it lengthens the window for incremental silver cash flows from the same district. This is no longer just an exploration story; it is a developing production pipeline.

Asset recycling supports a cleaner capital story

First Majestic also entered into a definitive agreement to sell its San Martin silver mine for $90 million. That supports a more disciplined capital-allocation narrative than a simple 'drill more, spend more' story. If disposal proceeds help fund the Santa Elena buildout or reduce reliance on outside capital, the market may eventually value the company as more than a spot silver proxy.

AG may still be below consensus, but the setup is less forgiving

AG is already above its 200-day simple moving average and near the top of its 52-week range, so the simplest 'nobody believes it' setup is gone. What remains is a gap between price action and consensus valuation: the average analyst target is $23.50, or about 50.8% upside from the $15.59 reference price used in that consensus.

That is the real tension for investors now. The stock can still rerate from here, but it is no longer a clear lazy entry.

Management is also giving the market reasons to stay engaged. The dividend rose 217% year over year, and the company 1.2 million shares were repurchased for $22.7 million in Q2. That makes the equity less dependent on a perfect macro backdrop, because capital returns give investors some value even if the market takes longer to fully credit future project optionality.