The Lynas Rare Earths Ltd (ASX: LYC) share price is trading in the red again in Thursday afternoon trade. At the time of writing, the shares have fallen 1.33% and are changing hands at $12.60 a piece.
Since peaking at a 14-year high of $21.64 per share in mid-October, Lynas shares have crashed 41.77%. But the share price is still 93.96% higher for the year to date.
Image source: Getty Images
What has happened to Lynas shares?
Shares in the miner have soared this year and have ridden the wave of booming demand for rare earths materials.
The demand boom peaked in mid-October when US President Donald Trump and Australian Prime Minister Anthony Albanese struck a deal to bolster rare earths and critical mineral supplies. The US and Australia will boost investments to expand mining operations and processing of the minerals. The plan was introduced to reduce dependence on China's exports.
The deal came amid ongoing trade tensions between the US and China. China controls around 70% of the global rare earths trade. The US has been focused on reducing its reliance on China and building up its own sovereign supply chains for some time.
Later in the same month, Lynas revealed plans to establish a new Heavy Rare Earths (HRE) separation facility at Lynas Malaysia to meet strong market demand. Investors were clearly thrilled.
Fast forward to today, and the share price paints a different picture.
In a recent meeting between Trump and China's president Xi Jinping, the US and China reached a trade framework to ease tariffs and postpone export controls for a year. This has helped alleviate fears of supply chain disruptions, an issue that had previously driven the Lynas valuation sky-high.
Are the shares a buy, sell, or hold?
While the drop of Lynas shares from their multi-year peak is significant, the shares are still trading much higher than they were this time last year.
But analysts are pretty divided about where they think the share price will travel from here. Data shows that the split between analysts with a strong buy, hold, and sell rating is nearly equal.
The average target price, however, is $15.59. At the time of writing, this implies a potential 23.42% upside ahead for investors.
The team at Macquarie are optimistic about Lynas shares and expects more outperformance from the ASX 200 stock. The broker has a $17 target price on the shares, adding that it expects the rare earths market to remain tight.
On the flip side, Ord Minnett's Tony Paterno recommends cashing in gains on Lynas shares. He said that he sees the shares as overvalued, and suggested that investors consider cashing in some gains.
