The Core Lithium Ltd (ASX: CXO) share price has run out of steam on Tuesday.
At the time of writing, the lithium developer's shares are down 4% to $1.18.
Why is the Core Lithium share price falling?
There appears to be a couple of catalysts for the weakness in the Core Lithium share price today.
One is broad selling in the lithium space this morning, which has seen the likes of Allkem Ltd (ASX: AKE) and Pilbara Minerals Ltd (ASX: PLS) also drop into the red.
The other reason could be a broker note out of Goldman Sachs today.
According to the note, the broker has reiterated its sell rating and 95 cents price target on the company's shares. Based on where Core Lithium shares currently trade, this implies potential downside of 20% for investors over the next 12 months.
Why is Goldman bearish?
While Goldman Sachs was pleased with the progress the company is making with its Finniss project, it isn't enough for a more positive view. Particularly given the wet weather the company has been facing.
In response to the wet weather, the broker has lowered its "expectations for additional DSO cargos."
But the main reason it is bearish is the Core Lithium share price, which Goldman believes is significantly overvalued. The broker explained:
Our FY23 EPS is down -9% on minor adjustments to our FY23E production ramp up profile, where we also lower our expectations for additional DSO cargos, with our NAV down ~4% to A$0.80/sh and our 12m PT unchanged at A$0.95/sh. We rate CXO a Sell on: 1) Valuation at 1.5x NAV (peer average ~1.2x; on GSe LT US$1,000/t spodumene), pricing in ~US$2,250/t (peer average ~US$1,300/t) or implying current pricing persists for ~2 years (peer average ~1 year), while also having the lowest average operating FCF/t LCE, 2) Large resource upside required, and 3) Production risk.
