Lynas Rare Earths Ltd (ASX: LYC) shares have been sold off over the last 12 months.
During this time, the rare earths producer's shares are down 25%.
While this is very disappointing, analysts at Bell Potter believe it could have created a buying opportunity for investors this year.
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Lynas shares tipped as a buy
Bell Potter highlights that rare earths prices finished the year on a "sour note" and has downgraded its earnings estimates through to FY 2026 to reflect this.
Though, there is reason to be positive. The broker notes that "the weakening in prices caused delays for additional supply entering the market over 2023, which may further exacerbate future supply constraints and improve the outlook for LYC."
In light of this, Bell Potter remains positive on Lynas shares and has retained its buy rating with a trimmed price target of $8.50.
Based on the current Lynas share price of $6.38, this implies a potential upside of 33% for investors over the next 12 months.
The broker summarises its thoughts on the company as follows:
We have incorporated the above adjustments into our valuation which resulted in a 3.4% decrease in our target price to $8.50/sh (previously $8.80/sh) and we maintain our Buy recommendation in accordance with our ratings structure. LYC remains a high-quality business, and a key supplier of separated rare earths to Western economies. Our valuation doesn't consider expansions beyond 12ktpa NdPr as timing and costs pertaining to this are yet unknown, however the upside scenario could be a meaningful contributor to value should further details be released to the market.
Overall, the broker appears to believe that Lynas shares could be a good option for investors looking for exposure to the mining sector right now.
