It is fair to say that Lynas Rare Earths Ltd (ASX: LYC) shares have been on fire over the past 12 months.
During this time, the rare earths producer's shares have risen an impressive 150%.
This has been driven by growing demand for rare earths and Chinese export restrictions.
Is it too late to buy Lynas shares?
The team at Bell Potter thinks it is too late to invest and is urging investors to sell their shares if they own them. Especially after Lynas' quarterly update fell short of expectations.
Commenting on the quarter, Bell Potter highlights that its production and revenue were short of expectations. Though, it does acknowledge that the company's realised price was higher than forecast, which bodes well for its margins. It said:
LYC produced 1,404t NdPr (BPe 2,100t VA Cons 1,700t) and 978t other rare earths. The December quarter was plagued by power outages in Kalgoorlie and planned maintenance in Kuantan. LYC's achieved basket price hit a record $86/kg (BPe $60/kg VA Cons $67/kg). Revenue was $202m (BPe $279m VA Cons $206m). Cash operating costs were $140m, up from $115m in 1QFY26, equating to cash costs of $59/kg TREO.
Payments for capital expenditure were $45m, down from $66m in 1QFY26. LYC finished 1QFY26 with $1,030m in cash, down from $1,060m in 1QFY26. Whilst the result disappointed on production, the power outages look to be resolved (for now). The higher than forecast basket price appears to have been driven by mix and product premiums. Whilst it is uncertain how long LYC can manage this, it does bode well for near-term margin protection.
Time to sell
According to the note, the broker has retained its sell rating on Lynas shares with an improved price target of $11.15.
Based on its current share price of $16.75, this implies potential downside of 33% for investors over the next 12 months.
Although the broker is a fan of the company, it just simply isn't a fan of its valuation. Commenting on its sell recommendation, Bell Potter said:
Our target price increases to $11.15/sh (previously $9.60/sh), and we maintain our Sell recommendation. Whilst we like the business, asset, and team, we believe there is significant optimism priced into the stock, with investors using it as a hedge on US-China relations. Earnings changes in this report include: FY26 -16%, FY27 nc [no change], FY28 nc.
