While gold may enjoy the market’s spotlight during this trying season, investors should also pay close attention to silver. A much more volatile asset than gold, silver nevertheless attracts speculators because of its upward mobility during bullish cycles. Further, silver-mining firms such as Endeavour Silver (EXK) have benefitted quite handsomely. Moving forward, a few key catalysts could keep this training running hot.
For starters, the Barchart Technical Opinion indicator rates EXK stock as a strong 88% buy. Specifically, its short-term outlook suggests that Endeavour can maintain its current direction. As well, longer-term indicators affirm a continuation of the ongoing trend. About the only cautionary note is that EXK presently trades in highly overbought territory. Therefore, investors should watch out for a trend reversal.
Nevertheless, it’s also possible that the bullish trend is just beginning. Fundamentally, EXK stock enjoys robust momentum from its most-recent fourth quarter of 2022 earnings report. According to Zacks Equity Research, Endeavour reported earnings per share of 4 cents. In contrast, Wall Street analysts had the mining firm breaking even on per-share profitability.
Further, Endeavour’s revenue surged 69% year-over-year to $82 million. This tally handily beat the consensus target of $44 million. Zacks pointed out that the outperformance was primarily due to higher silver sales during the quarter.
The investment resource stated that “[t]he average realized silver price was $21.86 per ounce in the quarter, down 7% year over year. The average realized gold price was down 2% to $1,783 per ounce in the quarter. EXK sold 2.8 million ounces of silver in the quarter (up 99% year over year) and 11,843 ounces of gold (up 36% year over year).”
In addition, “[t]otal production in the fourth quarter of 2022 was 2.66 million silver equivalent ounces, consisting of 1.83 million ounces of silver and 10,370 ounces of gold. Compared with the prior-year quarter, production was up 21%.”
Precious Metals Demand Bolsters EXK Stock
None of the technical and fundamental developments went unnoticed by market traders. When the closing bell for the April 6 session rang out, EXK stock became one of the subjects of unusual stock options volume. Notably, total volume for EXK hit 12,901 contracts against an open interest reading of 35,108. The delta between the Thursday session volume and the trailing one-month average volume came out to 1,624.73%.
Moreover, call volume reached 12,865 contracts against put volume of only 36 contracts. This resulted in a put/call volume ratio of only 0.003, on paper dramatically favoring the bulls. As a potential signal to what the “smart money” is doing, the spiked interest in EXK stock may be significant.
Indeed, demand for Endeavour might only rise due to a major upside catalyst: a classic silver shortage.
In an interview with CNBC in January of this year, Nicky Shiels, head of metals strategy at precious metals company MKS PAMP, remarked that “[s]ilver is in a shortage… and there is a notable drawdown in the available physical stocks held in New York and London’s physical hubs, more so than seen in gold.”
As well, Shiels added that silver is expected to post deficits of more than 100 million ounces over the next five years, with industrial demand spurring the tight supply, according to the CNBC article.
“The largest segment of silver demand is industrial, [which equates] to almost 50% of total demand,” she said. At the time, Shiels called for a base case of silver prices to climb to $28. Enticingly, the bullish case calls for $30 or more.
Trading for around $25, silver only needs to move up 20% to reach $30 – a sizable jump forward to be sure but not impossible for a highly mobile asset like silver.
Analysts Give Their Blessing
Currently, Wall Street analysts peg EXK stock as a consensus moderate buy, which breaks down to three strong buys and two holds. Three months ago, the consensus view was the same. However, the individual ratings broke down as two strong buys and four holds.
Also, TipRanks notes that among analysts covering EXK stock within the past 90 days, their average price target stands at $4.70, which implies upside potential of over 12%. The most optimistic view calls for shares to hit $5.50, implying almost 32% returns. On the other hand, the pessimistic view sees a risk of shares falling to $3.71, which would be a 21% decline.
Still, with compelling fundamentals and options traders bidding up EXK stock, it wouldn’t be out of the question for Endeavour to move higher. Therefore, speculators may want to consider adding this name to their portfolios.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
