The Pilbara Minerals Ltd (ASX: PLS) share price is having another tough session on Monday.
In morning trade, the lithium miner's shares are down 4% to $4.51.
This means that they are now down approximately 12% since the release of its FY 2023 results.
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Is the Pilbara Minerals share price good value now?
One broker that doesn't think investors should be rushing in just yet is Citi.
This morning, in response to the company's results, the broker has downgraded its shares to a neutral rating with a trimmed price target of $4.80.
Based on the current Pilbara Minerals share price, this implies a potential upside of just over 6% for investors over the next 12 months.
In light of this and despite believing that the company is a high-quality miner, Citi doesn't appear to believe this makes the risk/reward on offer with its shares sufficient enough to warrant a buy rating. It commented:
Changed story? We don't think so. Neutral on valuation. PLS lost +7% today on the outlook and implications for FCF. We've doubled our capex expectations for the FY and assumed a higher run rate is the norm (waste stripping); we no longer model cash build in 1H24. That said we expect FY24 to be transitional as volumes ramp up and model a return to 10% FCF yield in FY25. We don't think the story has changed looking through FY24e's single digit FCF; PLS is operationally ahead of peers, has a Tier 1 asset and a war chest of +A$3.4bn with the option to buy-back stock or pay a FF special. We trim our TP 30cps on higher capex and move to Neutral on valuation. Investor questions today centered around i) capex delta, ii) potential for returns i.e. special, iii) uplift in stripping ratio for Pilgangoora.
All in all, Citi appears to believe investors should sit tight and wait for a better entry point down the line.
