H.C. Wainwright has maintained a positive outlook on Largo Resources Ltd. (NASDAQ: NASDAQ:LGO), reiterating a Buy rating and a price target of $4.40.
The firm's optimism is rooted in Largo's impressive quarterly production results announced on October 21. The company reported a significant increase in production, with 3,072 tonnes (approximately 6.8 million pounds) of vanadium equivalent produced, marking a 42% rise year-over-year (YoY) and a 14% increase quarter-over-quarter (QoQ).
The substantial growth in Largo's production is attributed to enhanced operational efficiencies and improved global recoveries, which averaged 81.1%. This is an increase from 76.9% in the third quarter of 2023 and 74.3% in the second quarter of 2024.
The analyst highlighted the company's mining of 600,198 tonnes of ore, a 34% YoY increase, at an average grade of 0.76%. Additionally, concentrate production saw a significant boost to 124,408 tonnes, up by 42% YoY, at an average concentrate grade of 2.94%.
Largo's ilmenite concentration plant's ongoing ramp-up has also been noted, with production reaching 16,383 tonnes during the quarter, a 90% QoQ increase from the 8,625 tonnes produced in the second quarter of 2024.
In other recent news, Largo Inc. is making strategic leadership changes to drive growth. The company has promoted Francesco D'Alessio to Chief Commercial Officer, a move aimed at enhancing sales and trading operations amidst the projected surge in vanadium demand.
D'Alessio's promotion is a response to the International Energy Agency's projections of a 500% increase in vanadium demand by 2050, highlighting the company's strategy to capitalize on this growing market.
In the financial sphere, Largo reported a decrease in revenue for Q2 of 2024, down to $28.6 million from the previous year's Q2 revenue of $53.1 million. The net loss for the period also increased to $14.5 million. In response to these results, H.C. Wainwright reduced its price target for Largo to $4.40 while maintaining a Buy rating.
Additionally, Largo announced the appointment of David Harris as the new Chief Financial Officer, marking another strategic leadership move. Despite a 20% decline in ore grades, Largo reported a 2% year-over-year increase in Q2 production, managing to offset this decrease with a 16% increase in total ore mined.
InvestingPro Insights
While H.C. Wainwright maintains a positive outlook on Largo Resources Ltd. (NASDAQ:LGO), recent InvestingPro data and tips provide additional context for investors. Despite the impressive production increase reported, Largo's financials present a mixed picture. The company's revenue for the last twelve months as of Q2 2024 stood at $158.9 million, with a concerning revenue decline of 25.15% over the same period.
InvestingPro Tips highlight that Largo is "quickly burning through cash" and "suffers from weak gross profit margins." This aligns with the reported gross profit margin of -5.61% for the last twelve months as of Q2 2024. However, it's worth noting that the stock has shown a "strong return over the last month," with a 22.98% price total return, potentially reflecting market optimism about the recent production increases.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide valuable insights into Largo's financial health and market position. These additional tips could be particularly useful in light of the company's mixed financial indicators and the anticipated impact of the upcoming kiln maintenance program.
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