Clear Street initiates REalloys stock with buy rating on rare earth potential

Investing.com - Clear Street initiated coverage on REalloys Inc. (NASDAQ:ALOY) with a Buy rating and a price target of $35.00, according to a report released Tuesday. The stock currently trades at $7.99, representing substantial upside potential to the analyst’s target, though shares have delivered a remarkable 206% return over the past year despite recent weakness.

The firm bases its valuation on 11 times enterprise value to EBITDA applied to its 2030 EBITDA estimate of $265 million. The valuation assumes possible dilution of 15 million additional shares, representing approximately 25% dilution, to partially fund capital expenditures through 2029.

Clear Street expects the remaining capital expenditure needs to be funded through cash, debt and government grants. The firm projects REalloys can become North America’s leading heavy rare earth metallization platform and supplier of purified heavy rare earth elements output beginning next year.

The company is constructing the largest heavy rare earths processing facility outside of China. Clear Street expects REalloys to become a large-scale rare earth magnet manufacturer in 2029 in Ohio.

The firm projects the company could achieve 7% global market share in 2030 if successful with Phases 1 and 2. REalloys operates across upstream mining and concentrate sourcing, midstream rare earth elements separation and processing, and downstream finished rare earth magnets, metals and alloys. For deeper insights into REalloys’ financial health and growth prospects, InvestingPro offers comprehensive analysis and exclusive metrics for subscribers.

In other recent news, REalloys Inc. announced the completion of a $50 million stock offering, selling 2,702,702 shares at $18.50 per share. The offering included a 30-day option for underwriters to purchase an additional 396,963 shares, with Clear Street and Needham & Company managing the process. The company also revealed plans to construct a heavy rare earth metallization facility in Ohio, with operations expected to begin between early and mid-2027. This facility, costing approximately $40 million, aims to produce about 30 tonnes of dysprosium and 15 tonnes of terbium metal annually. Additionally, REalloys has demonstrated a new acid-free processing method for producing metallization-grade rare earth fluorides, meeting industry standards for oxygen content. The company signed a memorandum of understanding with U.S. Critical Materials Corp. to secure up to 10% offtake from the Sheep Creek rare earth project in Montana. Furthermore, Joe Kasper has been appointed as chair of REalloys’ advisory board, joining other notable figures to advise on securing supply chains for the U.S. defense industrial base.

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