While the S&P/ASX 200 Index (ASX: XJO) slumped today, Pilbara Minerals Ltd (ASX: PLS) shares bumped up close to 6% by the market’s close. Furthermore, over the past six months, the Pilbara share price has gained 240%.
So what’s pushing the emerging lithium and tantalum producer’s shares higher today?
What’s driving the Pilbara share price higher?
Today Citi announced an upgrade to its Pilbara Minerals share price rating from ‘sell/high risk’ to ‘neutral/high risk’. The broker also raised its Pilbara share price target to $1.10, up from $1.00.
According to Citi analysts, electric vehicle (EV) sales proved to be extremely resilient in 2020, growing by ~35% year over year, while overall passenger vehicle sales fell ~20%.
Because of this trend, Citi forecasts a further 15% upside in Chinese battery grade carbonate prices by the fourth quarter of 2021. Citi expects a structural deficit to occur due to increasing EV market demand, thus increasing the price of lithium.
Canaccord Genuity also recently upgraded the Pilbara Minerals share price from ‘sell’ to ‘hold’. The firm expects that EV sales will continue to gain momentum, which will be driven by legislative changes, lower costs and increasing options available to consumers.
Like Citi, Canaccord sees the value of lithium carbonate rising. The group upgraded its lithium carbonate price estimate by ~75% over 2021-2024. Canaccord further noted that this revised pricing forecast resulted in an average 41% increase in price target across its global sector coverage.
Pilbara Minerals aims to position itself as a low-cost, long-term, sustainable lithium producer. It owns 100% of the Pilgangoora Lithium-Tantalum Project in Western Australia’s Pilbara region.
The operation consists of two processing plants. Plant one is a 2 million tonne per annum (Mtpa) mining and processing operation and Plant Two is presently under evaluation.
The Pilbara Minerals share price has shot up by around 300% over the past year.
Based on the current share price, the company’s market capitalisation is $3.1 billion with 2.9 billion shares outstanding.
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Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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