Is it possible that the Lynas Rare Earths Ltd (ASX: LYC) share price could drop to just $4 by the end of the 2021 calendar year?
One broker thinks that Lynas shares are headed lower from where they are today.
But time will tell how if, and how much, it falls.
A price target is where a broker feels a share price will be in 12 months from now, not necessarily at the end of the 2021 calendar year.
Brokers regularly update their thoughts about a business. Some businesses are more commonly covered than others.
One of the brokers that covers Lynas is Ord Minnett.
Price target for the Lynas share price
Ord Minnett has a price target on Lynas of $4.30. That suggests that the broker believes that Lynas shares could fall by around 40% over the next 12 months.
The broker noted the high levels of cash that the business has achieved and its good production.
Strong commodity prices are helping Lynas' profit and cashflow.
Whilst the business has done well with its operations, the broker is cautious after the strong run of the Lynas share price.
Over the last six months, the Lynas share price has risen by 29% and in the last year has gone up by 141%.
FY22 first quarter update
The resource business recently released its update for the first quarter of FY22.
Lynas said the global COVID-19 pandemic continues to present challenges and opportunities for the Lynas business in the quarter ending 30 September 2021.
Strong demand from the magnet market and increased market price for neodymium and praseodymium (NdPr) continued as economies recovered from the pandemic.
In terms of the numbers, invoiced revenue for the quarter was $121.6 million, the second highest quarterly result recorded for Lynas. The fourth quarter of FY21 showed $185.9 million of sales revenue.
Sales receipts for the FY22 first quarter amounted $92 million, compared to $192 million in the prior quarter.
Lynas ended with a closing cash balance of A$667.3 million, compared to $680.8 million at the end of FY21.
In terms of production, the company said that total rare earth oxide (REO) production was 3,166 tonnes, down from 3,778 tonnes in the last quarter of FY21. NdPr production was 1,255 tonnes, down from 1,393 tonnes in the prior quarter.
The Lynas share price has fallen 4.5% since the market learned of this update.
Lynas 2025 project
The company also gave a number of updates about its Lynas 2025 project.
Kiln components are en route to Australia, with 70% of procurement now complete. It also said that 70% of the procurement is now complete.
A process water agreement has been signed with the City of Kalgoorlie-Boulder.
On 20 October e2021, the WA EPA recommended the Kalgoorlie rare earth processing facility for environmental approval.
Lynas share price valuation
Based on the Ord Minnett projection, Lynas shares are valued at 17x FY23's estimated earnings.
