Analyst Daniel Major pointed out that when the broker started coverage last month in an uncertain price environment, low-cost, low-risk producers, which expected to continue to generate free cash flow at depressed silver and gold prices (which it sees Fresnillo as) should continue to outperform.
But Fresnillo shares rallied 27% compared to a 17% increase in the price in silver and gold up 7%, the broker highlights.
The analyst says the group's valuation now looks full and this is likely to limit upside from current levels "unless we see a material upside to gold and silver prices".
He downgrades the stock to 'neutral' from 'buy'. The target price stays the same at 1250p.
"Near term the outlook remains uncertain; upside risks surround further escalation of political tensions in the ME and higher oil prices; downside risks surround the potential announcement of QE tapering at the FED meeting on 18 Sept," says the broker.