On Thursday, Largo Resources Ltd. (NASDAQ:{{1089477|LGLGO) had its stock price target reduced by H.C. Wainwright from $4.40 to $4.20, while the firm maintained a Buy rating on the stock. The adjustment follows Largo's recent financial results, which indicated a revenue of $29.9 million for the quarter, resulting in a net loss of $10.1 million or ($0.16) per share.
The company's revenue fell short of the $44.0 million reported in the third quarter of 2023, while the net loss was nearly on par with the previous year's loss of $11.9 million, or ($0.19) per share. This year-over-year revenue drop of 32% is largely due to a significant decrease in Largo's revenue per pound of V2O5, which was down to $6.46/lb, a 25% drop, as vanadium prices continue to be weak.
Despite the overall decline, Largo's vanadium sales generated $27.2 million in revenue, and ilmenite sales contributed an additional $2.7 million. The latter is noted as an increasingly important aspect of Largo's business. A $1.1 million gain on foreign exchange also helped mitigate the net loss, which was an improvement over a net loss of $0.6 million in the same quarter the previous year due to foreign exchange.
Looking forward, H.C. Wainwright expressed a positive outlook for Largo Resources, citing the company's potential to benefit from operational efficiencies and its ability to adapt to the current challenges posed by the softer vanadium pricing environment. The firm reiterated its Buy rating on the stock while adjusting the price target.
In other recent news, Largo Resources reported a significant rise in production, recording a 42% increase year-over-year and a 14% increase quarter-over-quarter. This surge in production is attributed to improved operational efficiencies, resulting in an average global recovery rate of 81.1%.
The firm's mining of ore also saw a 34% increase year-over-year, and its concentrate production rose by 42%. However, Largo's Q2 2024 revenue showed a decrease, falling to $28.6 million from the previous year's Q2 revenue of $53.1 million.
In a strategic move, Largo has promoted Francesco D'Alessio to Chief Commercial Officer, aiming to enhance sales and trading operations in response to the projected surge in vanadium demand. Additionally, David Harris has been appointed as the new Chief Financial Officer. These leadership changes are part of Largo's strategy to capitalize on the growing vanadium market.
H.C. Wainwright has maintained a Buy rating for Largo Resources, despite reducing its price target to $4.40. These recent developments highlight Largo's focus on operational efficiencies and strategic leadership changes to navigate the current business environment.
InvestingPro Insights
Recent InvestingPro data provides additional context to Largo Resources' financial situation. The company's market capitalization stands at $130.93 million, reflecting its current market valuation. Largo's revenue for the last twelve months as of Q3 2024 was $144.82 million, with a concerning revenue growth decline of -28.31% over the same period. This aligns with the article's mention of the 32% year-over-year revenue drop in the most recent quarter.
InvestingPro Tips highlight that Largo is "quickly burning through cash" and "suffers from weak gross profit margins," which is evident in the reported gross profit margin of -6.87% for the last twelve months. These factors contribute to the company's financial challenges discussed in the article.
Despite these headwinds, InvestingPro Tips also note a "strong return over the last three months," with data showing a 28.12% price total return over that period. This suggests that market sentiment may be improving, possibly in response to the company's efforts to adapt to the challenging vanadium pricing environment, as mentioned by H.C. Wainwright.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips for Largo Resources, providing a deeper understanding of the company's financial health and market position.
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