Paradigm Capital lowers target on Loop Industries, keeps “Buy” rating

Following the company’s first quarter results, Paradigm Capital analyst J. Marvin Wolff has lowered his price target on Loop Industries (Loop Industries Stock Quote, Chart, News, Analysts, Financials NASDAQ:LOOP).

On July 13, Loop Industries reported its Q1, 2023 results. The company lost $18.01-million on zero revenue in the quarter, a lost that was $5.85-million greater than the previous year.

Founded in 2014, Loop Industries focuses on depolymerizing waste polyethylene terephthalate (PET) plastics and polyester fibres into base building blocks, turning polymers into virgin-quality PET plastic for use in food-grade packaging like plastic water bottles and carbonated soft drinks and containers for food and other consumer products.

Loop’s loss, which equated to $0.38 per share was greater than Wolff’s estimate of a $0.33 loss. But the analyst remains bullish on the stock, asserting that “Loop’s technology has the potential to be a global standard for PET recycling.”

The analyst explained his reasoning on the stock’s current valuation and upside.

“Loop has a current market cap of ~$224M with ~$159M in capital invested to date. With run-rate EBITDA likely to exceed $300M by FY29, we see the potential for material share price upside. In the near term, Loop expects to have three production plants up and running by FY27, and Becancour by FY26 (CY25). We are lowering our target price to $12.50 (from $21.00), based on 10x FY27e EV/EBITDA (15x prior) and discounted at 10% per year,” he said.

Wolff says waiting on Loop right now could come with a potential reward for investors in the form on long-term and sustainable margins.

“Loop’s unique 100% recycled product is expected to command a premium price, generating very strong economics, to maintain a 45–50% EBITDA margin and 20%+ IRRs at each of its production facilities. With an estimated EBITDA generation of +$100M per full-scale plant (assuming 100% ownership), and a goal of 6–10 plants by 2030, we see meaningful EBITDA growth over the next decade.