If you've ever considered investing in ASX lithium shares, you've likely come across a diverse range of opinions on where the battery-making material's price will go next. It can seem like, for every bullish expert, there's a bearish peer waiting to rebut. Interestingly however, one lithium bear is still tipping Pilbara Minerals Ltd (ASX: PLS) shares as a buy.
Here's why one might still consider snapping up the S&P/ASX 200 Index (ASX: XJO) lithium producer, even if they think the commodity's price could tumble.
Are Pilbara Minerals shares worth buying if lithium prices fall?
You don't have to look far to find an opinion on the future of lithium prices.
For instance, producers vehemently defended the material's value earlier this year. Meanwhile, Goldman Sachs remains sceptical on lithium but it continues to see value in the sector, nonetheless.
And therein lies one reason I might still consider buying Pilbara Minerals shares, even if I expect lithium prices to tumble.
Like most mining stocks, the lithium giant's earnings are directly tied to the price it can command from its production. However, as long as that price remains higher than its costs, it can feasibly bring in a decent profit.
Broker Morgans has a buy rating and a $5 price target on the stock. It believes the company could deliver strong profits even if the commodity's price drops, my Fool colleague James reports.
Indeed, the company recorded a $919 million cash margin from operations and a $457 million increase in its cash balance in the March quarter. That was despite its realised lithium price slipping 15% and its costs rising 9%.
Beyond that, increasing its production will likely increase its earnings, even if that production sells for less than it previously did.
The company expects the commissioning of its P680 expansion to begin in the September quarter. That will bring its flagship Pilgangoora Project's capacity to around 680,000 tonnes per annum.
That's to be bolstered by 47% to 1 million tonnes per annum by 2025 under its recently approved P1000 expansion.
With all that considered, the potential that lithium prices could fall doesn't necessarily wipe Pilbara Minerals shares from the table in my eyes.
