Franco-Nevada’s Hold Rating: Balancing Acquisition Impact and Premium Valuation

Franco-Nevada (FNV – Research Report), the Basic Materials sector company, was revisited by a Wall Street analyst today. Analyst Lawson Winder from Bank of America Securities reiterated a Hold rating on the stock and has a C$266.00 price target.

Lawson Winder has given his Hold rating due to a combination of factors surrounding Franco-Nevada’s recent acquisition and financial outlook. The company recently acquired a 7.5% gross margin royalty on the Côté Gold mine in Canada for $1,050 million. While this acquisition offers a long mine life, the immediate internal rate of return (IRR) is modest, particularly when considering current and base case gold prices. This has led to a slight reduction in the net asset value (NAV)-based price objective by 2% to C$266 per share.
Despite Franco-Nevada’s well-diversified portfolio and reliable long-term exposure to precious metals, the stock is trading at a premium compared to its peers, which is not fully justified by its growth prospects. Although there is potential for extending the mine life and increasing annual gold production at Côté Gold, these factors are not enough to warrant a more bullish rating. Consequently, the Hold rating reflects a balanced view of the company’s strengths and the challenges it faces in achieving higher returns.

According to TipRanks, Winder is a 4-star analyst with an average return of 3.7% and a 51.47% success rate. Winder covers the Basic Materials sector, focusing on stocks such as Franco-Nevada, Alamos Gold, and Agnico Eagle.

In another report released on May 20, RBC Capital also maintained a Hold rating on the stock with a $160.00 price target.