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Why Macquarie is tipping 25% upside for the Lynas share price

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The Lynas Rare Earths Ltd (ASX: LYC) share price has fallen since the start of the year, but one analyst believes there are better days ahead.

Lynas shares have fallen nearly 26% in the year to date and are currently trading at $7.55. In today’s trade, the company’s share price is down 1.44%. For perspective, the S&P/ASX 200 Index (ASX: XJO) is 0.74% in the red today.

Let’s take a look at the outlook for this rare earths explorer.

How high could the Lynas share price go?

Lynas is a rare earths company exploring the Mt Weld mine in Western Australia. The company also operates a rare earths processing plant in Malaysia.

The Lynas share price hit a yearly high of $11.39 in April before descending to the current share price.

However, the team at Macquarie believe Lynas can recoup some of these losses. The broker has raised the Lynas share price to outperform, the Australian Financial Review reported. Analysts have placed a $9.40 price target on Lynas shares. This is 25% more than the current share price.

Lynas reported a net profit after tax (NPAT) of $540.8 million in FY22, 244% more than the previous financial year. Revenue also lifted 88% from FY21 to $920 million.

Lynas produces Neodymium and Praseodymium (NdPr). The company is investing $500 million to increase capacity at the Mt Weld wine to 12,000 tonnes per annum of NdPr equivalent.

Lynas is also constructing a rare earths processing facility in Kalgoorlie and expanding to the United States.

The company is constructing a commercial Heavy Rare Earths separation facility in the United States, after receiving a US$120 million contract from the US Department of Defense. Planning is underway and this project is due to be operational in 2025.

Lynas share price snapshot

The Lynas share price has lost nearly 15% in the past month and nearly 7% in the last week. However, in the past year, Lynas shares have climbed 13%.

For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) has climbed 3% in the last year.

Lynas has a market capitalisation of nearly $6.83 billion based on the current share price.

Read More: Why Macquarie is tipping 25% upside for the Lynas share price

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