Agnico Eagle Mines Ltd (TSX:AEM) has been downgraded to a Neutral rating from Buy by UBS, citing the stock’s strong rally and stretched relative valuation against its peers.
"We remain constructive on the outlook for gold, and we continue to see gold equities as an important portfolio diversifier," the analysts wrote. "However, after consistent outperformance, Agnico’s relative valuation looks stretched, especially when compared to peers such as Newmont (NEM) and Barrick Gold (ABX), which are trading at 15% and 30% discounts to their five-year average multiples, respectively."
The investment bank raised its 12-month price target to $110 per share from $100, reflecting higher gold price forecasts but noted that further upside is limited unless gold prices rise significantly or the stock re-rates.
Agnico Eagle has been a standout performer in the gold sector, delivering a 120% return over the past two years and trading at 8.2 times its estimated 2025 enterprise value-to-EBITDA, in line with its five-year average.
However, UBS analysts believe this valuation implies a gold price above $3,000 per ounce, exceeding the firm’s forecast of $2,900 per ounce for 2025-26.
Analysts argue that Agnico Eagle might not deliver significant production growth over the next three years, with output forecast to remain flat between 2025 and 2027. The company has more than doubled its gold production over the last six years, largely due to the acquisitions of Kirkland Lake Gold and Yamana Gold. Future growth is expected from long-term projects such as Canadian Malartic and Hope Bay, but these developments will primarily replace depletion rather than drive near-term expansion.
"Given a very strong past 12 months, we think the valuation is becoming stretched," the analysts wrote.
Shares of Agnico Eagle have gained nearly 40% to date.