Loop Industries: this analyst just slashed his target

Paradigm Capital analyst Marvin Wolff downgraded Loop Industries (Loop Industries Stock Quote, Chart, News, Analysts, Financials NASDAQ:LOOP) to “Speculative Buy” from “Buy” and slashed his target to US$1.60 from US$6.10, citing financing risks and changes to the company’s planned recycling facilities in India.

In an Oct. 18 update, Wolff said Loop’s limited cash reserves leave it in a vulnerable position as the company prepares to build its first commercial plant through its ELITe joint venture with Ester Industries.

Loop reported fiscal Q2 2027 revenue of US$100,000, negative EBITDA of US$2.4-million and a loss of six cents per share, broadly in line with expectations.

The company is considering reducing the initial capacity of its first India plant to 45,000 tonnes annually from 70,000 tonnes to lower construction costs.

Wolff said detailed engineering work is expected to be completed by the end of December, providing more clarity on the revised capital requirements.

Despite the smaller first phase, the joint venture still plans to develop two facilities with combined annual capacity of 170,000 tonnes.

Management estimates Loop will need to contribute US$12-million to US$15-million in equity to the first plant, subject to final engineering work. About US$3-million has already been committed.

Loop’s board has established a special committee to evaluate alternative financing options for its equity contribution.

Wolff said the company had just US$800,000 in cash and total liquidity of US$1.8-million, although engineering fees from the joint venture are beginning to provide additional funds.

The project has received support from the government of Gujarat, which signed a memorandum of understanding to help streamline permitting, infrastructure coordination and administrative processes.

The joint venture has secured a 93-acre site in Surat, India, with enough land for both facilities.

Wolff said construction and commissioning of the first plant should take about 20 months. A start in early 2027 would put full operations in late 2028, with both plants targeted for completion by October 2030.

Loop is pursuing a capital-light commercialization strategy built around joint ventures, technology licensing, royalties and engineering services.

The company’s patented technology converts waste PET plastics and polyester into materials that can be used to produce recycled plastics and textiles.

Wolff said the India joint venture benefits from lower construction and labour costs, access to polyester waste and an established relationship with Ester Industries.

The project also has a multi-year offtake agreement with Nike, providing an anchor customer for recycled polyester products.

Wolff lowered his financial forecasts to reflect the revised development schedule and financing assumptions.

The analyst’s new valuation assumes both Indian plants are operating in fiscal 2031, compared with fiscal 2030 previously, and incorporates a higher discount rate of 12%, up from 8%.

He also increased his assumed share count to 148.3-million from 66.5-million, reflecting potential financing dilution.

The US$1.60 target is based on seven times his fiscal 2031 EBITDA estimate, including royalty income.

“While there are interested parties on the debt portion of the India plant #1 joint venture, we believe Loop’s low cash level puts it in a vulnerable position,” Wolff said.

Wolff expects Loop to generate negative EBITDA of US$11.4-million on revenue of US$900,000 in fiscal 2027, followed by negative EBITDA of US$10.6-million on revenue of US$1.1-million in fiscal 2028.

He forecasts revenue of US$36-million and negative EBITDA of US$1.5-million in fiscal 2029, compared with his previous estimates of US$73.5-million and positive EBITDA of US$25-million.

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