Is it time to sell your Pilbara Minerals Ltd shares?

One of the best performer in the resources sector in 2017 has been the Pilbara Minerals Ltd (ASX: PLS) share price.

Its shares are up a remarkable 185% since the start of the year.

Is it time to take profit?

While I think that Pilbara Minerals and its lithium miner peers Galaxy Resources Limited (ASX: GXY) and Orocobre Limited (ASX: ORE) have bright futures ahead of them, I do think that investors ought to consider taking a little profit off the table.

At this point in time I think fair value for Pilbara Minerals is approximately $1.00. I believe this factors in the agreements with Great Wall Motors and Atlas Iron Limited (ASX: AGO) and the prospect of higher lithium prices in 2018.

As this is approximately 12% lower than the current share price, I feel its shares have more downside risk than upside potential over the next 12 months.

I’m not the only one that thinks this. Analysts at Citi recently slapped a sell rating on Pilbara Minerals’ shares with a $1.05 price target.

According to that note, the broker has concerns that all the positive news flow has been built into its share price now, leaving only downside risk associated with delays from construction and commissioning activities.

Foolish takeaway

If its shares did come down to the $1.00 mark I would be very happy to snap them up with a long-term view. As electric vehicle adoption accelerates and lithium supply fails to keep up with demand, I suspect that Australia’s lithium miners will deliver above-average revenue growth and strong free cash flows over the next decade.

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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. 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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