Southern Copper (SCCO) stock's valuation is stretched and its copper production is expected to fall this year and the next, UBS said in a Tuesday note.

The company's stock is currently priced about 80% higher than other copper stocks and has historically traded at around a 50% premium to peers, leading UBS analysts to believe that Southern Copper is stretched, according to the note.

The analysts said the premium could decrease with Southern Copper's production set to decline around 5% year over year in 2026 and 2027 to its lowest level in 12 years. The main drivers of the production decline are the falling ore grades and the forecasted delay to the start-up of the Tia Maria project to 2028 rather than 2027 as announced, the analysts said. They added that progress at the company's other key projects in Mexico and Peru is proceeding slower than expected.

The analysts retained a positive view on copper in 2026 and 2027 as they expect prices to be buoyed by supply shortages and robust demand. However, they see the possibility of prices consolidating in the near term due to the speed and magnitude of the recent price spike.

UBS downgraded the company's stock to sell from neutral and adjusted the price target to $148 from $143.