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On Friday, H.C. Wainwright adjusted its price target on shares of Largo Resources Ltd. (NASDAQ: NASDAQ:{{1089477|LGLGO), decreasing it to $3.70 from the previous $3.90, while keeping a Buy rating on the stock. The firm based its decision on Largo’s first-quarter financial results for 2025, which were disclosed on May 14. With a current market capitalization of $89 million and trading at $1.39, InvestingPro analysis suggests the stock is currently undervalued, though investors should note several challenges facing the company.
Largo Resources reported first-quarter revenue of $28.2 million, resulting in a net loss of $9.2 million, or $0.14 per share. This performance marks a decline from the first quarter of 2024, where the company achieved $42.2 million in revenue and a net loss of $13.0 million, or $0.20 per share. The year-over-year drop in revenue was primarily attributed to lower vanadium prices and a decrease in sales volume. The company’s revenue for the quarter fell short of H.C. Wainwright’s forecast of $30.2 million. InvestingPro data reveals concerning metrics, including a negative gross profit margin of -8.24% and a significant 39.5% decline in trailing twelve-month revenue.
Despite the lower revenue, Largo has shown a strong commitment to reducing its cost base. The company successfully decreased its operating costs and adjusted cash operating costs excluding royalties by 15% and 27% year-over-year, respectively. H.C. Wainwright emphasizes this cost-cutting strategy as an indicator of the company’s potential for a transformative year in 2025. However, InvestingPro analysis indicates the company faces significant challenges with its debt burden of $92.1 million and a concerning current ratio of 0.56, suggesting potential liquidity issues. For deeper insights into Largo’s financial health and detailed analysis, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
The research firm maintains that the ongoing improvements at Largo, particularly in cost management, are expected to enhance future cash flows as the company begins to tap into higher-grade ore zones. H.C. Wainwright’s analysts underscore the importance of Largo’s cost-cutting initiatives and predict that these efforts will significantly contribute to the company’s cash flow from operations moving forward.
In conclusion, while the price target has been slightly reduced, H.C. Wainwright reaffirms its positive stance on Largo Resources, expecting the company’s strategic measures to yield favorable financial outcomes in the future. The firm reiterates its Buy rating and adjusts the price target to $3.70, reflecting a cautious yet optimistic outlook on Largo’s operational progress.
In other recent news, Largo Resources Ltd. reported a year-over-year decline in revenue, with figures dropping to $124.9 million and a net loss increasing to $50.6 million, or $0.78 per share. This downturn contrasts with the previous year’s results, which showed $198.7 million in revenue and a net loss of $32.4 million, or $0.51 per share. The decline in financial performance is attributed to a significant decrease in production and lower market prices for vanadium, a key product for Largo. Despite these challenges, H.C. Wainwright maintained its Buy rating on Largo, raising the price target to $3.90 from $3.70. The firm highlighted Largo’s proactive cost reduction initiatives aimed at improving margins and increasing free cash flow. Additionally, operational improvements are anticipated, as recovery rates have increased to 77.8% from 70.5% the previous year. H.C. Wainwright remains optimistic about Largo’s strategic adjustments and their potential positive impact on the company’s financial future. The firm’s confidence is reflected in its unchanged Buy rating and revised price target.
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