UBS Upgrades Lynas Rare Earths with Bullish Price Target Revision

Shares of Australian rare earths producer Lynas surged more than 6% on Tuesday following a significant analyst upgrade from Swiss financial giant UBS. The bank shifted its rating from "Neutral" to "Buy" while simultaneously increasing its price target by a substantial 18%. This optimistic reassessment arrives as Lynas, the world's largest producer of rare earths outside China, continues its impressive run, having already climbed over 140% since the start of the year.

The revision stems from a recent site visit by UBS analysts to Lynas's Malaysian processing facility. The inspection prompted the firm to raise its price target from A$15.10 to A$17.80, signaling strong confidence in a market that has recently shown volatility. A key factor in this positive outlook is the favorable pricing environment for Neodymium-Praseodymium (NdPr), critical components for electric vehicle motors and wind turbines. Prices for these materials have already increased by 40% this year. UBS projects long-term prices could reach $100 per kilogram, significantly above the $77 currently factored into Lynas's planning.

Beyond current market conditions, UBS identifies major growth potential in Lynas's planned expansion into heavy rare earths production. This strategic move into scarcer materials is forecast to generate approximately A$700 million in additional revenue, representing a 27% increase over 2028 projections. The company's proprietary separation technology and head start over competitors position it advantageously. Analysts estimate an 18-month construction period, followed by a production ramp-up phase. Global scarcity of these materials and their strategic importance for nations seeking to diversify supply chains away from China further bolster Lynas's prospects.

Should investors sell immediately? Or is it worth buying Lynas?

Operational Excellence as a Competitive Edge

The UBS team reported being particularly impressed by the operational stability and expertise within the Malaysian plant. A remarkable 70% of the workforce at this highly complex facility have been employed there for more than a decade. In an industry where rare earths processing demands significant technical skill, this depth of experience provides Lynas with a substantial and durable competitive advantage that is difficult for newcomers to replicate.

Recent Pullback Presents Buying Opportunity

After reaching record highs, Lynas stock had experienced a pullback of roughly 25%. This correction was partly driven by China's temporary relaxation of rare earth export controls. UBS interprets this price dip as a strategic entry point for investors focused on the long-term demand trajectory for these critical minerals. With its fully integrated supply chain—from the Mt. Weld mine in Western Australia to its processing operations in Malaysia—Lynas occupies a pivotal role in establishing a reliable Western supply source for rare earths. The coming months will be crucial for observing whether the upward price trend for rare earths persists and if the company's expansion initiatives proceed according to schedule.