The Pilbara Minerals Ltd (ASX: PLS) share price closed almost 4% higher at $3.17 today, after one broker outlined a very bullish outlook for the ASX lithium share.
Pilbara Minerals is one of the ASX's largest lithium miners, with a market capitalisation of more than $9.4 billion at the current share price.
The broker Macquarie thinks that the resources company will get a lot bigger over the next 12 months in terms of what investors will value the business.
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What does Macquarie think will happen?
Firstly, let's talk about the price target.
That's where Macquarie thinks that the Pilbara Minerals share price will be in 12 months from now.
Macquarie has set its price target on Pilbara Minerals at $5.60, up from $4. That implies a rise of close to 80% over the next 12 months.
Why so positive? The broker thinks the lithium price will be stronger for longer than previously expected. This is largely due to the relationship between supply and demand and the current high price of lithium. Macquarie believes demand will outstrip supply in the medium-term.
In addition, the broker thinks that the price difference in lithium between China and regionally will continue until 2024.
Macquarie also increased its forecast for spodumene – a type of lithium ore with a higher level of lithium content which is used for batteries for electric vehicles.
The broker said that its annual price forecast for 2023 climbed by 55% and more than doubled for 2024, 2025 and 2026.
These pricing forecast increases mean that the broker now thinks Pilbara Minerals will generate more earnings in the coming years, with the ASX lithium share having plenty of leverage when lithium prices rise.
According to Macquarie, the Pilbara Minerals share price is now valued at under 5x FY23's estimated earnings.
Experts confident on the company
Macquarie isn't the only one that likes the look of Pilbara Minerals.
My colleague Brooke Cooper reported earlier today that TMS Capital's Henry Jennings believes that lithium shares could benefit from the push towards electric vehicles if the current economic uncertainty fades away.
She also reported on expectations from Citi that Pilbara Minerals could start paying a dividend in FY23 with an initial payment of 29 cents per share in FY23 and then 21 cents per share in FY24.
Pilbara Minerals share price snapshot
Over the past two months, shares in the company have climbed more than 50%, although they are still almost 10% lower than at the start of the year.
Pilbara Minerals is due to report its full-year earnings results tomorrow.
