Why has the Piedmont Lithium share price cratered 13% in a week?

Piedmont shares have been heavily sold off by investors.

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Key points

  • Piedmont shares ended Tuesday's market session at 80 cents, down 3.03% 
  • The company's shares have been sold off following Goldman Sachs' bearish analysis on the lithium sector 
  • The broker predicts the price of the battery making ingredient to fall more than 75% in the next year 

The Piedmont Lithium Ltd (ASX: PLL) share price has reversed all of its gains since the start of the month.

This comes despite the company not releasing any price-sensitive news to the ASX lately.

At market close, shares in the Australian lithium miner finished the day at 80 cents, down 3.03%. This means that its shares have lost 13% in a week.

Let’s take a look at what could be driving the fall around the company’s share price.

What has happened to Piedmont shares?

Investors are continuing to offload Piedmont shares after heavy falls across the lithium sector in the past week.

As widely reported, Goldman Sachs sent shockwaves across the lithium industry following its bearish report.

The United States-based investment behemoth predicted that lithium prices will drop to US$16,000 per tonne in 2023.

Currently, the going price for the battery making ingredient is around US$70,000. This represents a drop of more than 77% in the coming year.

According to Goldman Sachs, the sharp correction is being driven by “fundamental mispricing which has generated an outsized supply response.”

While lithium miners dismissed the negative analysis, investors sidelined with Goldman Sachs, sending lithium stocks south.

On the upside, the broker believes that long-term demand for lithium will remain robust from around 2024.

Piedmont share price summary

Despite the recent fall, the Piedmont share price has risen by almost 9% in 2022.

However, when looking at the longer-term, the company’s shares are down 12% over the past 12 months.

For context, the S&P/ASX 200 Index (ASX: XJO) has tumbled 4.6% in 2022, and 2.5% since this time last year.

Based on today’s price, Piedmont commands a market capitalisation of roughly $453.71 million.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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