The Pilbara Minerals Ltd (ASX: PLS) share price is out of form on Thursday.
In afternoon trade, the lithium miner's shares are down almost 5% to $4.49.
Why is the Pilbara Minerals share price sinking?
Pilbara Minerals shares could be falling today because of a broker note out of Goldman Sachs this morning.
That note has warned investors that lithium prices could be heading materially lower from the second half of calendar year 2023.
Here's a summary of what Goldman Sachs' team is expecting from spodumene (6% grade) prices:
- 2022 US$4,233
- 2023 US$4,330
- 2024 US$800
- 2025 US$800
This is expected to be driven by a significant increase in production globally. In fact, the broker estimates that by 2025, global lithium demand will grow to ~1,300kt LCE but lithium production will increase to ~1,700kt LCE.
Are its shares good value now?
Unfortunately, Goldman Sachs doesn't see enough value in the Pilbara Minerals share price to recommend it as a buy.
According to the note, the broker has initiated coverage on its shares with a neutral rating and $4.50 price target. This is broadly in line with where Pilbara Minerals shares have fallen to this afternoon.
It commented:
We are Neutral-rated on PLS as we see incremental capex spend and near time prices which are supportive of strong FCF yield more than priced into the stock and it is trading broadly in line with peers.
While near-term prices support a strong c. 10-15% FCF yield over and above planned incremental capex spend, we see this as priced in trading at 1.3x NAV on GSe LT US$1,000/t spodumene (peer average 1.3x) implying current pricing persists for ~2 years.
