It is fair to say that Lynas Rare Earths Ltd (ASX: LYC) shares have been on fire this year.
Since the start of the year, the rare earths producer's shares have risen over 200%.
This gives the high-flying stock a market capitalisation of over $21 billion today.
Does this make it expensive or can its shares keep rising? Let's see what brokers are saying about the popular stock.
Are Lynas Rare Earths shares in danger of crashing?
Unfortunately, a number of analysts believe that the bubble could soon burst.
One of those is Ord Minnett. This week, courtesy of The Bull, its analysts slapped a sell rating on the stock. The broker said:
Lynas is the only commercial producer of separated light and heavy rare earth oxides outside of China. The company recently raised $932 million from institutional investors and eligible shareholders to accelerate growth from additional balance sheet strength. However, the company announced in August that it's uncertain whether construction of its heavy rare earths processing facility in the US state of Texas will proceed.
The company's shares have risen from $6.85 on April 2 to trade at $20.03 on October 9. We believe the shares are overvalued for a company with weaker earnings in fiscal year 2025 when compared to the prior corresponding period. Investors may want to consider cashing in some gains at these levels.
Who else is bearish?
Ord Minnett isn't alone in feeling bearish on Lynas Rare Earths shares at current levels.
Bell Potter is warning investors off the company and recently put a sell rating and $9.35 price target on its shares. This is over 50% lower than where its shares trade today.
Our Target price increases to $9.35/sh (previously $7.65), and we maintain our Sell recommendation. We do recognise that the current themes pushing LYC higher are likely to persist as tailwinds over the short term. We have seen the US play its hand with the MP Materials deal; this could form a blueprint for other sovereign investments. Despite this, we believe LYC is priced for perfection, with little room for error.
In addition, this morning, Macquarie declared the company's shares as fully valued. It said:
LYC trades at a premium as the only large-scale rare earths producer outside China, with an implied NdPr price of US$120/kg. MEI offers greater upside, trading near spot NdPr prices. ILU's valuation reflects both mineral sands and rare earths. At current mineral sands spot prices, ILU also implies a US$120/ kg NdPr price. Given equity names have outpaced underlying NdPr price increases and diminishing effects of further control tightening, we see LYC and ILU as fully priced at these levels.
Macquarie has a neutral rating and $18.50 price target on its shares.
