Core Lithium Ltd (ASX: CXO) shares are falling again on Wednesday.
In morning trade, the lithium miner's shares are down almost 3% to 35 cents.
This means its shares are now down over 75% since this time last year.
Are Core Lithium shares cheap?
Despite this sizeable drop, the team at Goldman Sachs doesn't believe investors should be rushing in to buy its shares just yet.
According to a note out this morning, the broker has retained its neutral rating and cut its price target on the company's shares by 12% to 37 cents.
This implies approximately 5.5% upside from current levels, which is not a sufficient risk/reward to command a higher rating.
What did the broker say?
Goldman has concerns over Core Lithium's lower grade lithium. It explains:
CXO has engaged both offtake partners in discussions to broaden the specification for spodumene concentrate in existing agreements to include acceptance of grades with a minimum of 4.5% Li2O (previous threshold was ~5.5%). CXO discussions with one customer are well advanced, with commercial arrangements being finalised, while the other offtake partner has finalised an agreement for the FY24 period.
CXO noted the result of lower grade may include a small discount to spodumene pricing but expect to offset this discount through higher volumes on improved recoveries, though we note this discount may widen (or realisations may fall) with continued declines in lithium/spodumene pricing.
Outside this, Goldman continues to see its shares as overvalued compared to peers. It notes that its shares are "trading at ~1.1x NAV or pricing ~US$1,100/t (peer average ~1x & ~US$1,050/t), with the lowest average operating FCF/t LCE on a more moderated production ramp up."
