On Tuesday, B.Riley began coverage on Stardust Power Inc (NASDAQ:SDST), an emerging lithium producer, issuing a Buy rating and setting a price target of $12.00 for the company's stock. The firm highlighted the potential of Stardust's large-scale lithium refinery project in Muskogee, Oklahoma, which aims to be one of the largest of its kind in the United States with a proposed capacity of 50,000 metric tons per annum.
The analyst from B.Riley noted that while the engineering and financing details are still under finalization, the Muskogee project is expected to have strong economics and a relatively near-term development timeline. The final investment decision for the project is anticipated by mid-2025, with the commencement of production expected in late 2027.
According to B.Riley, the market is currently undervaluing Stardust Power, with the shares trading at a 32% price to net asset value (P/NAV) and an implied lithium price of $18,350 per metric ton. The firm also mentioned that it applies a 50% P/NAV discount to the project at this stage, which may be subject to change as Stardust Power continues to reach key milestones in the project's development.
The coverage report also shed light on the company's utilization of direct lithium extraction (DLE) technology for its Muskogee refinery. B.Riley considers DLE to be a technology on the verge of widespread adoption in the lithium industry, offering significant environmental and economic advantages over traditional lithium extraction methods. The firm views Stardust Power as a distinctive investment opportunity within the lithium sector due to its expected use of this innovative technology.
In other recent news, Stardust Power Inc. has been engaged in several significant developments. The company has entered into a 90-day exclusivity agreement with KMX Technologies, Inc. for the negotiation of a lithium brine concentration technology, known as vacuum membrane distillation (VMD). This technology is expected to lower operating costs and capital expenditures across Stardust Power's supply chain. The potential licensing arrangement could grant Stardust Power exclusive rights to the VMD technology for lithium extraction in several global jurisdictions.
Stardust Power has also appointed Paramita Das as its new Chief Strategy Officer and Senior Advisor. With over two decades of experience in the metals and mining industry, Das is expected to support Stardust Power's commercialization efforts and drive the company's strategy. Additionally, the company has transitioned from WithumSmith+Brown, PC, to KNAV CPA LLP as its independent registered public accounting firm, a decision executed without any reported disagreements on accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
Furthermore, Stardust Power has signed a significant engineering agreement with Primero USA, Inc. valued at approximately $4.7 million. The contract pertains to the development of Stardust Power's Muskogee Lithium facility in Oklahoma, with services including engineering, design, and consultancy expected to be completed in the first half of 2025. These developments mark a period of notable change and progress for Stardust Power Inc.
InvestingPro Insights
While B.Riley's optimistic outlook on Stardust Power Inc (NASDAQ:SDST) highlights the company's potential in the lithium industry, recent InvestingPro data provides additional context for investors. The company's market capitalization stands at $368.62 million, reflecting its current valuation in the market.
InvestingPro Tips indicate that SDST "operates with a moderate level of debt" and "suffers from weak gross profit margins." These factors may be important considerations as the company moves forward with its ambitious Muskogee project. The stock's high price volatility, as noted by another InvestingPro Tip, aligns with the nascent stage of the company's development and the speculative nature of its future prospects.
It's worth noting that SDST is currently not profitable, with an adjusted operating income of -$4.59 million over the last twelve months as of Q2 2024. This financial performance is typical for companies in the early stages of large-scale projects, but it underscores the importance of successful execution in the coming years.
Investors seeking a more comprehensive analysis can access additional InvestingPro Tips, with 5 more tips available for SDST on the InvestingPro platform.
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