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Riley Starts Covering Stardust Power

By: Investor Brand Network

November 01, 2024 at 09:05 AM EDT

Riley Financial Inc. (NASDAQ: RILY) has issued a “Buy” rating on Stardust Power Inc. (NASDAQ: SDST), setting a promising price target of $12.00 per share. The diversified financial company recognizes great possibilities in Stardust’s strategies for building one of the largest lithium refineries in the U.S., located in Muskogee, Oklahoma. When fully operational, the refinery is expected to produce an impressive 50,000 metric tons of lithium annually. As final engineering and financing continue, the plant’s strong economic prospects and speedy development schedule have placed Stardust firmly within the lithium market.

Stardust Power has decided to distinguish itself using direct lithium extraction (DLE) technology. B. Riley considers Stardust a unique pick in the lithium industry because DLE could be the next big leap forward. DLE offers significant environmental benefits and efficiency gains, unlike traditional extraction methods. DLE is a much greener, more cost-effective approach that could put Stardust in a position to meet industry standards for more sustainable mining.

At current prices, B. Riley believes Stardust trades below its true value, trading at a 32% price-to-net asset value (P/NAV), implying a lithium price of $18,350 per metric ton. While the Los Angeles-based company has initially applied a cautious 50% P/NAV discount, it’s open to revising this as Stardust hits major milestones for the Muskogee project, adding a sense of potential upside for investors keeping a close eye on the stock.

In addition to the major Muskogee project, Stardust has secured a 90-day exclusivity agreement with KMX Technologies to negotiate using its vacuum membrane distillation (VMD) technology. If Stardust manages to secure exclusive rights, VMD could help it reduce both operating costs and capital needs across its supply chain. The partnership might just give Stardust an edge by keeping expenses low while scaling production.

Furthermore, leadership changes are in motion. Paramita Das, who recently joined as Chief Strategy Officer, is expected to boost Stardust’s commercialization strategy, driving growth as the company moves closer to launching the Muskogee plant. Stardust also secured a $4.7 million engineering contract with Primero USA to assist in design and engineering, a key step with completion set for mid-2025.

Nonetheless, Stardust is facing some challenges. For instance, like many early-stage companies, it’s yet to be profitable, with recent reports showing a loss of $4.59 million in adjusted operating income over the past year. As it approaches production, hitting performance and cost targets will be crucial.

As demand for lithium grows, largely driven by electric vehicles, Stardust is positioned to make an impact. B. Riley’s endorsement signals confidence that Stardust has the potential to become a significant player in U.S. lithium production, especially as it meets critical project milestones and moves toward production.

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