Lynas (ASX:LYC) share price tipped for 18% upside

One broker is expecting more upside in the Lynas share price…

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The Lynas Rare Earths Ltd (ASX: LYC) share price was pushed higher yesterday on positive sentiment. At the end of Tuesday’s session, the rare earth miner’s shares finished at $8.87, 4.35% above their previous close.

Strength in the company’s share price helped Lynas set another new 52-week high of $8.95. With no announcements out, investors are forced to look at other potential catalysts for Tuesday’s record share price.

Sydney-based broker, Barrenjoey initiating coverage on Lynas and giving it an ‘overweight’ rating might have something to do with it.

Is the Lynas share price a buy at its 52-week high?

Despite the multi-year high for the Lynas share price, some analysts think the rare earths miner could have more upside still to give.

According to Barrenjoey analyst, Danial Morgan, the outlook for the high-flying mining company is looking positive. As a result, the broker initiated coverage on Lynas with an overweight rating. Accompanying this was a share price target of $10.50.

Since the March low in 2020, the company’s shares have been on a seemingly unstoppable path. Over this time, the value of each share has ballooned by nearly 600%. This incredible surge in the value of Lynas has been aided by a similarly rocketing price for neodymium and other rare earth elements.

While demand for the elements has been at record levels, the company expects an even stronger demand in 2022. Unless a significant increase in supply comes online in the near term, the price of rare earth elements has the potential to rise further if demand increases.

The higher commodity prices have also turned Lynas into a cash flow machine thanks to operating expenses largely staying the same. In FY21, the company produced free cash flow of $174.6 million and a record profit of $157 million.

Shareholders who have managed to maintain conviction in the Lynas share price are now up 112% for the year.

Motley Fool contributor Mitchell Lawler owns shares of Lynas Corporation Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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