LNZA stock is a buy, Roth says

Following the company’s most recent results, Roth MKM analyst Leo Mariani has maintained his “Buy” rating on Lanzatech Global (Lanzatech Global Stock Quote, Chart, News, Analysts, Financials NASDAQ:LNZA)

On February 28, LNZA reported its Q4 and fiscal 2023 results. In the fourth quarter, the company posted a Net Loss of $18.7-million on revenue of $20.5-million, a topline that was up 77 per cent, year-over-year.

“2023 was an important year for LanzaTech, and I am extremely proud of the many notable milestones and accomplishments achieved during the Company’s inaugural year as a publicly traded company,” CEO Jennifer Holmgren said. “However, our results for the fourth quarter and full year 2023 demonstrate we have a lot more work ahead of us. The organizational initiatives and corrective actions announced are focused on better enabling us to execute our primary strategic objectives including safety, commercial growth, and profitability. While I am disappointed in our financial performance in the fourth quarter, after three prior quarters of more significant growth, I have full confidence in our leadership team to execute our business plan and to continue our path toward profitability with a new sense of accountability from the top down.”

The analyst summarized the quarter.

“LanzaTech’s 4Q23 revenues of $20.5Mn were $13.6 below our estimate, & EBITDA of ($12.5Mn) was $3.5Mn better than our expectation,” he said. “LNZA’s 4Q23 revenues of $20.5mn were up $0.9mn from $19.6mn in 3Q23, but was $13.6mn below our $34.0mn estimate. LNZA’s 4Q23 EBITDA of ($12.5mn) was up $6.6mn vs. 3Q23 EBITDA of ($19.2mn) and was $3.5mn better than our estimate of ($16.0mn). LNZA’s gross margins of 41.4% in 4Q23 were up 15% vs. 3Q23 levels of 26.7% and well above our estimate of 23.1%.”

In a research update to clients February 28, Mariani maintained his “Buy” rating on LanzaTech Global, but cut his price target from $8.00 to $6.00.

The analyst thinks LNZA will post EBITDA of negative $65.3-million on revenue of $95.2-million in fiscal 2024. He expects those numbers will improve to EBITDA of negative $33.3-million on a topline of $175.7-million in fiscal 2025.

“LNZA currently trades at around 6.2x our 2024 revenue estimate and around 3.5x our 2025 revenue estimate,” Mariani concluded. “Our $6 price target (from $8.00) is based on a 5.5x multiple of our 2025 revenue estimate which yields around $5 plus $1 in value for LNZA’s ~50% interest in LanzaJet. Impediments to our price target include slower than-expected revenue growth, lower-than-expected gross margins and industry competition hurting longterm growth.”