This Canadian rare earth stock is a buy, analyst says

Ventum Capital Markets analyst Marvin Wolff raised his 12-month target price for Neo Performance Materials (Neo Performance Materials Stock Quote, Chart, News, Analysts, Financials TSX:NEO) to C$24.00 from C$20.50 and maintained his “Buy” rating in an Oct. 2 research note, calling the opening of the company’s Narva plant a “watershed moment” for Western rare earth supply chains.

Toronto-based Neo is a rare earths company specializing in NdFeB permanent magnets for automotive and EV traction motors, as well as rare earth materials for catalytic converters. It operates a fully integrated mines-to-magnet supply chain.

Neo recently held the grand opening of its Narva traction motor magnet plant in Estonia, the first such facility in the West. Wolff said the move positions Neo as the only Western-based producer of rare earth sintered permanent magnets, offering Western OEMs the ability to build traction motors with fully Western components.

“We believe the opening of the Narva sintered magnet plant is a watershed moment for NEO as it moves into sintered permanent magnet production,” he said.

Global demand for EVs and wind turbines continues to expand, with wind growing at a 10% CAGR (from US$70-billion today to US$150-billion by 2033) and global EV production expected to reach 20 million units in 2025, or 20% of total vehicle output. Wolff said the shift away from Chinese supply chains is accelerating, as the West seeks self-reliance on critical technologies from mine to manufacturing.

Neo currently produces roughly 13,000 tonnes per year of product, including 6,000–7,000 tonnes of magnets, and Wolff said traction motor magnets could ultimately dominate its production profile at around 20,000 tpa. He noted that Neo’s balance sheet is strong, with $80-million in cash and $50-million in unused credit lines, supporting its capital investment program.

NEO currently generates about $60–$75-million in EBITDA, and Wolff believes participation in EV traction motors could lift that to $125–$150-million over time. He said the company’s low U.S. tariff exposure and unique European operations provide further strategic advantages.

Wolff forecasts Neo will generate $66.1-million in Adjusted EBITDA on revenue of $460.6-million in fiscal 2025, improving to $73.3-million on $498.1-million in fiscal 2026. These figures were previously $59.8-million/$455.9-million for 2025 and $64.2-million/$451.5-million for 2026.

On valuation, Wolff shifted his horizon from 2027 to 2029, when he expects Narva to contribute $45-million in EBITDA and existing operations $75-million, for a total of $120-million. Applying an 8× EV/EBITDA multiple and a 10% discount rate, he arrived at the new C$24.00 target.

“We are of the view that this global leader in rare earths and magnetics should be appealing to strategic entities,” he said.

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