Solar Panel Recycling And Silver Demand Will Drive Massive Long Term Upside

Catalysts

About Comstock

Comstock develops and scales technologies for high throughput solar panel metals recycling and renewable fuels production.

What are the underlying business or industry changes driving this perspective?

• Acceleration of utility scale solar panel retirements, growing from about 3.5 million panels today to roughly 33 million by 2030, positions Comstock’s high speed, low cost recycling platform to capture rising tip fees and material sales, which may drive step function revenue growth and operating leverage.
• Surging industrial demand for silver in solar, electrification and compute infrastructure, combined with constrained mine supply, may increase the value of Comstock’s silver rich tailings and potential future in house refining, which could support gross margins and earnings as silver volumes ramp from each new plant line.
• Tightening U.S. environmental and waste regulations for end of life solar panels can increase the premium on fully permitted, zero landfill solutions, potentially reinforcing Comstock’s first mover position with major utilities and supporting premium pricing and relatively durable net margins.
• Growth in data centers and energy intensive compute near Northern Nevada and Sierra Springs may increase the strategic focus on Comstock’s land and water portfolio, creating potential monetization events and non dilutive capital that could be reinvested into metals capacity and support free cash flow.
• Bioleum’s high yield renewable fuel platform, supported by strategic capital from Marathon and state supported projects in Wisconsin and Oklahoma, targets large scale, low carbon fuel production that could create equity value for Comstock and ultimately augment consolidated earnings through its majority stake.

Assumptions

This narrative explores a more optimistic perspective on Comstock compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Comstock's revenue will grow by 322.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -1894.1% today to 46.1% in 3 years time.
• The bullish analysts expect earnings to reach $97.0 million (and earnings per share of $1.75) by about December 2028, up from $-52.6 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $47.0 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 5.3x on those 2028 earnings, up from -3.2x today. This future PE is lower than the current PE for the US Oil and Gas industry at 13.3x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.96%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The ramp in solar panel volumes may arrive more slowly than management anticipates, with customer hesitancy already visible as some utilities delay shipments until permits and large scale operations are fully proven, which could suppress recycling throughput and delay the inflection to higher revenue and positive earnings.
• Comstock’s strategy depends on building and replicating large, capital intensive metals facilities and, over time, in house refining for silver and rare earths. These projects face execution, technology scale up and permitting risks that could inflate operating costs and capex, putting pressure on net margins and free cash flow.
• Bioleum’s business model relies on continued access to generous public incentives, tax free bonds and strong demand for low carbon fuels. Any policy reversal, slower adoption of sustainable aviation fuel or cost overruns at new biorefineries could limit dividends or valuation uplift from this asset, reducing its contribution to consolidated earnings and balance sheet strength.
• The monetization of mining and land assets, including the Dayton gold project and Sierra Springs data center properties, depends on sustained high precious metals prices, hyperscale data center build out and willing partners. Weaker commodity prices or a slowdown in data infrastructure investment could reduce potential transaction values and constrain non dilutive capital available for reinvestment, lowering future net income.
• Comstock’s growth plan assumes access to external equity and project level financing at attractive terms, but the company has a history of dilution and complex instruments. Any deterioration in capital markets, higher interest rates or investor appetite could force additional share issuance or delay projects, diluting existing holders and constraining revenue growth and long term earnings power.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Comstock is $6.75, which represents up to two standard deviations above the consensus price target of $5.38. This valuation is based on what can be assumed as the expectations of Comstock's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $6.75, and the most bearish reporting a price target of just $4.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $210.2 million, earnings will come to $97.0 million, and it would be trading on a PE ratio of 5.3x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $3.26, the analyst price target of $6.75 is 51.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.