The Pilbara Minerals Ltd (ASX: PLS) share price has been rocketing in the last weeks. Over the past month, it has risen by 27.66%.
It has delivered strong outperformance compared to the S&P/ASX 200 Index (ASX: XJO) which has only risen 5.27% over the same time period.
Of course, Pilbara Minerals isn't the only business that may be viewed as an 'ASX growth share' which has seen a strong rise over the past month.
In the last month: the Xero Limited (ASX: XRO) share price has risen 14%, the Temple & Webster Group Ltd (ASX: TPW) share price has gone up 35% and the Altium Limited (ASX: ALU) share price has risen 10%.
Part of Pilbara Mineral's rise may simply be down to the fact that other growth names have also been rising.
Perhaps investors thought that a number of growth names had been sold off too much?
Can strong lithium prices affect the Pilbara Minerals share price?
One of the most important things to remember about commodity businesses is that their revenue, cash flow and net profit after tax (NPAT) are all heavily affected by what the resource price is.
It costs a commodity business roughly the same to produce its resource, whether the commodity price is a bit higher or lower, aside from higher payments to the government when prices are stronger.
Last week, Pilbara Minerals said that it continues to benefit from strong lithium prices.
The ASX lithium share's eighth Battery Material Exchange (BMX) auction was for a cargo of 5,000 dry metric tonnes (dmt) at a target grade of 5.5% lithia. The highest bid was US$6,350 per dmt, which on a pro rata basis for lithia content (including freight costs) equates to a price of around US$7,012 per dmt.
Pilbara Minerals said:
Strong continues to be received in both participation and bidding by a broad range of qualified buyers with a total of 67 bids received online during the 30-minute auction window.
What do analysts think?
The broker Macquarie has an outperform rating on the Pilbara Minerals share price, with a price target of $4. That implies a possible rise of 33%.
Macquarie thinks that more output from the company's Ngungaju can help boost sales on the BMX and lead to pleasing cash flow in the coming years.
The broker thinks that profit is going to ramp up over the next couple of years. Its estimates put the Pilbara Minerals share price at 14 times FY22's estimated earnings and under six times FY23's estimated earnings.
Ord Minnett also thinks that Pilbara Minerals is a buy, with a price target of $3.50. That implies a possible rise of around 17%.
Pilbara Minerals share price snapshot
Pilbara Minerals shares have dropped by 6% since the beginning of the year, though it has risen around 50% since mid-June.
