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Top broker downgrades Galaxy Resources Limited shares

The strong run of the Galaxy Resources Limited (ASX: GXY) share price came to an abrupt end today.

In morning trade the lithium miner’s shares are down over 3% to $3.89.

Why are its shares lower?

Today’s decline appears to be related to a broker note out of Morgan Stanley this morning.

According to the note, the investment bank’s analysts have downgraded Galaxy’s shares to an equal-weight rating from overweight.

The broker has, however, increased its price target on the lithium miner’s shares to $3.80 from $3.00.

Morgan Stanley appears to believe that the strong share price gain in recent weeks has now factored in the majority of opportunities that lay ahead for the miner.

What now?

Even as a Galaxy shareholder I would have to agree with Morgan Stanley on this one. As delighted as I am to see its shares more than double in value in the last three months, I do think that they are about fair value now.

While I have no plans to sell my shares and expect to hold them for the long-term, I wouldn’t be surprised to see other investors taking profit and driving its shares a touch lower from here.

This could create a buying opportunity for investors that missed out on the rally and wish to gain exposure to a lithium industry which I expect to only get stronger over the next few years.

Incidentally, the Orocobre Limited (ASX: ORE) share price is also down 3% today after Morgans downgraded its shares to a hold rating.

Finally, here's a tech share which I think could be a big winner from the electric vehicle boom like Galaxy and Orocobre.

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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia owns shares of ACONEX FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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