H.C. Wainwright adjusted its outlook on Largo Resources Ltd. (NASDAQ: NASDAQ:LGO), reducing the price target to $4.40 from the previous $4.70, while maintaining a Buy rating on the stock. The revision follows Largo Resources' disclosure of its financial outcomes for the second quarter of 2024 on August 8, which highlighted a year-over-year decline in revenue and an increase in net losses.
Largo Resources reported a revenue of $28.6 million for the second quarter of 2024, a steep drop from the $53.1 million generated in the same quarter of the previous year. The net loss for the period was $14.5 million, or $0.23 per share, compared to a net loss of $6.0 million, or $0.09 per share, in the second quarter of 2023.
A significant factor contributing to the reduced revenue was the approximately 31% year-over-year decrease in revenue per pound of V2O5, which fell to $6.46/lb. The company's profitability was further impacted by a $4.1 million loss due to foreign exchange fluctuations.
Despite these setbacks, H.C. Wainwright anticipates Largo Resources will benefit from its strategic focus on operational efficiencies. The company's management is expected to continue steering through the current environment of weaker vanadium pricing.
Largo reported a 2% year-over-year increase in its second-quarter production for 2024, producing 2,689 tonnes of vanadium equivalent. Despite a 20% decline in ore grades, the company managed to counterbalance this decrease with a 16% increase in the total ore mined. H.C. Wainwright, in response, adjusted its price target for Largo Resources shares to $4.70, maintaining a Buy rating.
The company also announced the appointment of David Harris as its new Chief Financial Officer. This leadership change is intended to bolster Largo's financial leadership as the company navigates its growth and operational strategies.
In the first quarter of 2024, Largo Resources reported a significant revenue decrease to $42.2 million, resulting in a net loss of $13 million. H.C. Wainwright subsequently raised its price target on Largo Resources' shares to $4.80, maintaining a Buy rating.
InvestingPro Insights
In light of H.C. Wainwright's recent adjustment of Largo Resources Ltd.'s price target, an examination of real-time data and InvestingPro Tips can provide additional context for investors. The company's market capitalization stands at $113.82 million, with a negative P/E ratio of -2.23, reflecting challenges in profitability. Notably, Largo Resources has experienced a significant revenue decline of 25.15% over the last twelve months as of Q2 2024, with the most recent quarterly figures showing an even steeper drop of 46.23%. This aligns with the difficulties mentioned in the article regarding vanadium prices and demand.
InvestingPro Tips highlight several critical points for investors to consider. Largo Resources is quickly burning through cash and suffers from weak gross profit margins, with a gross profit margin of -5.61% over the last twelve months as of Q2 2024. Analysts do not anticipate the company will be profitable this year, and the valuation implies a poor free cash flow yield. On a positive note, the company's liquid assets exceed its short-term obligations, which may provide some financial flexibility in the near term. However, it's important to note that Largo Resources has not been profitable over the last twelve months and does not pay a dividend to shareholders, which could be of concern for income-focused investors.
For those seeking a more in-depth analysis, there are additional InvestingPro Tips available on the platform, which could aid in making a more informed investment decision regarding Largo Resources. The company's next earnings date is set for November 6, 2024, which will be an important event for investors to watch closely.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.