Pilbara Minerals Ltd (ASX: PLS) shares have smashed the benchmark performance over almost any time frame you choose. And they're charging higher again today, up 3.9% to $5.38 per share.
Since the opening bell of 3 January, shares in the S&P/ASX 200 Index (ASX: XJO) lithium stock have rocketed 46%. And that's not including the 11 cents per share maiden dividend Pilbara stock paid out on 24 March.
By comparison, the ASX 200 has gained 6% so far in 2023.
So, what's all this about Pilbara shares being a clear takeover target?
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Is there major M&A ahead for ASX 200 lithium shares?
As The Australian Financial Review reports, E&P analyst Adam Martin is forecasting a sizeable retrace in the lithium price over the next three years.
And this could see Pilbara Minerals shares targeted for acquisition.
On the lithium price front, E&P joins a growing number of analysts that believe the world is headed for a medium-term oversupply of lithium. Global EV production is widely expected to keep growing. But a heap of new lithium mines coming into production is forecast to put renewed downward pressure on lithium prices.
Spodumene (a lithium-bearing mineral) prices hit all times highs of more than US$6,000 a tonne in November 2022 before falling off a cliff. They've since rebounded to around US$3,500 a tonne today.
E&P forecasts spodumene prices will average US$3,475 a tonne in FY 2024, US$2,200 a tonne in FY 2025, and slide to US$1,800 a tonne in FY 2026.
That kind of retrace could throw up some headwinds for Pilbara Minerals and competing ASX 200 lithium stocks. And there could be some sudden moves.
According to Martin:
Commodity prices don't move gradually or linearly, so it is quite possible any price decline is sudden and volatile… The key challenge for equity investors is forecasting how prices might decline over the medium term given balance sheet and cashflow implications.
Martin believes the Aussie lithium sector is ripe for mergers and acquisitions ((M&A).
And he said Pilbara Minerals shares are the "obvious" takeover target, thanks to the miner's $3 billion cash position, its single asset focus, and its strong recent share price performance.
The broker has a neutral recommendation on Pilbara with a $4.90 price target.
Pilbara Minerals has a "neutral" recommendation and is expected to perform in line with the benchmark index, with a price target of $4.90. That's about 9% below the current share price.
Of course, should news emerge of takeover interest, almost anything could happen.
How have Pilbara shares performed longer-term?
As mentioned up top, Pilbara shares have trounced the benchmark performance over almost any time frame you choose.
Investors who bought the ASX 200 lithium stock five years ago will be sitting on gains of 549% today. The ASX 200 is up 17% over that same period.
