Lynas Rare Earths Ltd (ASX: LYC) shares are marching higher today.
Shares in the S&P/ASX 200 Index (ASX: XJO) rare earths miner closed yesterday trading for $15.51. In afternoon trade on Thursday, shares are changing hands for $15.71 each, up 1.3%.
For some context, the ASX 200 is up 1.1% today, with the benchmark index just breaking into new all-time highs.
Over the past year, the ASX 200 has now gained 8.1%, which pales in comparison to the 135.2% one-year gains achieved by Lynas shares. That's enough to turn a $10,000 investment into $23,518.
Looking to the year ahead, however, Bell Potter Securities' Christopher Watt believes the rare earths miner could face some stiff headwinds (courtesy of The Bull).
Here's why.
Image source: Getty Images
Time to sell Lynas shares?
"While Lynas boasts strategic positioning in rare earths amid a positive long-term theme, execution risks, in our view, remain elevated," said Watt, who has a sell recommendation on Lynas shares.
According to Watt:
The consensus among market watchers is for significant volatility ahead. Operational challenges, including power supply disruptions at the Kalgoorlie processing plant and geopolitical uncertainty, add further complexity.
Watt also pointed to the highly volatile price moves Lynas Rare Earths investors have weathered over the last year.
"The share price has been volatile. It rose from $6.89 on February 12, 2025 to $21.64 on October 15. LYC was trading at $15.92 on February 12, 2026," he said.
And, unlike many ASX 200 mining stocks, Lynas doesn't bring any passive income to the table.
"There's no dividend yield," Watt concluded.
What's been happening with the ASX 200 rare earths miner?
Lynas shares closed up 6.7% on 21 January after the company reported its second-quarter (Q2 FY 2026) update.
Investors were clearly pleased with the rare earth miner's $201.9 million gross sales revenue, up 43% from Q2 FY 2025.
Revenue got a big boost from the 74% year-on-year increase in the average selling price Lynas received across all its rare earths products over the three months. The average price was $85.60 per kilogram.
However, as Watt noted above, Lynas did encounter significant operational challenges over the quarter.
Lynas ran into power supply disruptions at its Western Australia-based Kalgoorlie plant in November. And operations were also hindered by planned kiln maintenance at the miner's Malaysian Kuantan facility.
This led to a 9% year-on-year decrease in total rare earth oxide (REO) production in Q2 FY 2026 to 2,382 tonnes. REO production was down a sharp 40% from the prior quarter.
