Is it possible the Pilbara Minerals share price has topped out?

Here's what some experts believe about the potential of Pilbara's share price.

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Key points
  • One investment bank believes Pilbara's share price could move to higher levels
  • This mirrors the sentiment of an earlier rating assigned to the company in September
  • Analysts could be bullish on Pilbara following its record lithium auction results

The Pilbara Minerals Ltd (ASX: PLS) share price has been running hot over some important timeframes, including beating the S&P/ASX 200 Materials Index (ASX: XMJ) by a significant margin over the past year.

Shares of the company are up:

  • 38.75% year to date
  • 128.87% over the past year, and
  • 124.94% versus the materials sector over the past year

When shares rise quickly like this, some investors fear that they could be overvalued. This can cause some hesitancy for investors to buy them over the short term.

The Jefferies Group investment bank has taken a stab recently to answer the question of whether Pilbara's shares have topped out in an article posted by the Australian Financial Review (AFR) last Thursday.

Let's cover what the broker said.

A kid stretches up to reach the top of the ruler drawn on the wall behind.

Image source: Getty Images

Pilbara could have additional upside

Pilbara's shares were rated as hold by Jefferies Group. Contrary to what some believe, a hold rating doesn't necessarily mean that its shares are expected to flatline for the projected period. Instead, a hold rating generally means a company's shares are expected to perform in step with companies in its peer universe. And with ASX lithium shares expected to rise across the board, Pilbara's shares are also expected to lift higher.

This is further reflected in the fact that Jefferies gave Pilbara's shares a price target of $4.75 each. That's an appreciable upside of 7.4% at the time of writing.

Earlier this month, Macquarie gave Pilbara's shares a price target of $5.60, representing a sizable upside of 26.6%. My Fool colleague James notes that analysts were impressed with its most recent battery material exchange auction results, receiving its highest ever bid of US$6,988 per dmt in September.

So with these recent ratings in mind, it appears that Pilbara's shares could continue to rally to new heights, and might not have hit their ceiling just yet.

Pilbara share price snapshot

The Pilbara share price is down 2.96% this Monday afternoon.

Shares of the lithium producer currently trade for $4.43. Earlier today, shares made an intraday high of $4.59 and a low of $4.37.

The Pilbara share price is up 38.28% year to date.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is down 13.05% over the same period

The company's market capitalisation is around 13.61 billion.

Motley Fool contributor Matthew Farley 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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