Southern Copper Shares Face Analyst Scrutiny Amid Lofty Valuation

A major Wall Street investment bank has issued a stark warning on Southern Copper, sending the mining giant's shares under pressure. JPMorgan Chase has downgraded the stock from "Neutral" to "Underweight," arguing that a powerful rally has pushed its valuation to unsustainable levels. This move places a spotlight on whether the equity has disconnected from its underlying fundamentals.

Market strategists at JPMorgan justified their decision by pointing to a significant valuation disconnect. They slashed their price target for the stock to $117.50, implying a potential downside of approximately 33% from current trading levels. This severe assessment comes in the wake of a 46% surge in the share price over the preceding three months. The bank's experts view this rapid appreciation as unjustified, even as they maintain a positive outlook on the copper market itself.

Notably, the fundamental picture for the industrial metal remains robust. JPMorgan's commodities research team forecasts an average copper price of $12,075 per tonne for 2026, with a peak of $12,500 expected in the second quarter. The takeaway is unambiguous: while the commodity's prospects are strong, the related equity may have raced too far ahead.

Should investors sell immediately? Or is it worth buying Southern Copper?

Operational Stability Contrasts with Extreme Multiples

From an operational standpoint, Southern Copper continues to perform steadily. Its production forecast for 2026 is only marginally below 2025 levels, suggesting a stabilization phase following earlier ore grade fluctuations. Furthermore, the key Tia Maria project in Peru is advancing on schedule and is projected to contribute 120,000 tonnes of annual copper production starting in 2027.

The valuation metrics, however, present a concerning contrast. The stock currently trades at a price-to-earnings (P/E) ratio of 39.5 and an enterprise-value-to-EBITDA multiple of 20.8. Both figures represent a substantial premium compared to industry averages, with Southern Copper trading roughly 80% above the sector mean. In the view of analysts, this extreme valuation, coupled with only moderate projected production growth, creates a high-risk environment for investors.

The future trajectory of the share price is expected to be heavily influenced by underlying metal price dynamics. For market participants, the central issue of valuation will remain paramount as they await the company's upcoming quarterly results and monitor copper price movements leading into spring 2026.