Pilbara Minerals share price jumped today as Macquarie tips 80% upside

One broker thinks that this ASX lithium share has a very promising future.

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Key points

  • Broker Macquarie predicts that the Pilbara Minerals share price will rise strongly
  • It just increased its price target to $5.60
  • One reason for the optimism is that the broker thinks the lithium price could stay stronger for longer

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.

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.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison 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 recommended Macquarie Group Limited. 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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