National Bank Financial moved HudBay Minerals (TSX:HBM) (NYSE:HBM) from an Outperform rating to Sector Perform on Thursday, even as it lifted its 12-month price target to C$40.00 from C$28.00.
The change in recommendation follows a period of pronounced share-price strength for HudBay. The stock has climbed 212% since the start of 2025, outstripping the TSX Global Base Metals Index, which rose 82% over the same interval. National Bank Financial noted that since it upgraded the stock to Outperform on May 14, 2024, HudBay shares have appreciated 166%, compared with a 53% gain for the index in that span.
Valuation concerns drove the firm to narrow its upside call. National Bank Financial highlighted that HudBay now trades at 1.25x net asset value (NAV), slightly above the peer average of 1.19x. On an earnings multiple basis, HudBay is at 10.9x enterprise value to 2026 estimated cash flow, versus a peer group average of 8.4x. Those relative premium metrics contributed to the decision to lower the rating despite the higher price target.
The research note also flagged caution around HudBay’s upcoming guidance, saying that uncertainty tied to forward company guidance was a contributing factor in the rating change. The firm did not provide additional detail on specific guidance assumptions in the public summary.
Other brokerages have taken more positive views in the wake of HudBay’s recent corporate activity. HudBay completed a transaction with Mitsubishi, selling a 30% interest in its Copper World project. That deal prompted TD Cowen to resume coverage with a Buy rating and a markedly higher price target of C$43.00, up from C$17.00. UBS also initiated coverage with a Buy rating and set a C$34.50 price target.
UBS underscored HudBay’s growth profile, calling the company a diversified mid-tier copper producer with material expansion potential. UBS projects a 55% increase in attributable copper equivalent production, from roughly 205,000 tonnes per annum in 2025 to 320,000 tonnes per annum by 2030. Those production projections were presented by UBS in support of its constructive view.
In sum, the market shows divergent analyst assessments: National Bank Financial trimmed its recommendation on valuation grounds and guidance uncertainty while raising its near-term price objective, and other firms have moved to Buy on the company’s growth prospects following the Copper World transaction.
Summary
National Bank Financial downgraded HudBay to Sector Perform despite raising its price target to C$40, pointing to a relative valuation premium and caution on upcoming guidance. Meanwhile, TD Cowen and UBS have advanced bullish recommendations after HudBay sold a 30% interest in Copper World to Mitsubishi and outlined material production growth expectations.
Key points
- National Bank Financial cut HudBay to Sector Perform from Outperform and raised its target to C$40 from C$28.
- HudBay shares have surged 212% year-to-date, well ahead of the TSX Global Base Metals Index's 82% rise; the stock rose 166% since National Bank Financial's May 14, 2024 upgrade.
- Other brokers - TD Cowen and UBS - have issued Buy ratings following HudBay's deal with Mitsubishi and UBS projects a 55% increase in attributable copper equivalent production to 320,000 tpa by 2030.
Risks and uncertainties
- Premium valuation - HudBay trades at 1.25x NAV and 10.9x EV/2026E CF, both above peer averages, which raises valuation risk for equity investors in the metals sector.
- Upcoming company guidance - National Bank Financial expressed caution about HudBay's forthcoming guidance, creating near-term uncertainty for forecasts and investor expectations.
- Divergent analyst views - Contrasting ratings from different brokers following the Copper World transaction could lead to heightened price volatility for HudBay and for the base metals sector.