Are ASX short sellers right about Pilbara Minerals shares?

Let's see what some of the big brokers think.

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Pilbara Minerals Ltd (ASX: PLS) shares are the most shorted stock on the ASX today.

A significant 18.5% of the ASX 200 lithium stock is currently short-sold.

That means a bunch of professional traders are betting that Pilbara Minerals shares will fall in value.

The Pilbara Minerals share price is trading at $3.59 on Tuesday, up 1.13% amid the ASX 200 being up 0.75%.

Are the short sellers right?

Pilbara Minerals shares down 34% from August high

In the year to date, Pilbara Minerals shares have slipped 0.89% overall.

But more recently, they have recorded a dramatic 33.9% fall from a 52-week high of $5.43 in August.

Of course, spiralling lithium prices are largely to blame here.

In Pilbara Minerals' September quarter update, the company reported a 47% decline in its realised price for spodumene concentrate.

The price has dropped from US$4,266 per tonne in the September quarter of 2022 to US$2,240 per tonne in this year's September quarter.

As per a note from top broker Goldman Sachs this week, lithium prices have fallen dramatically from their 2022 levels.

Here are the latest lithium spot prices:

  • Lithium carbonate: US$17,076 per tonne, down 71.5%
  • Lithium hydroxide: US$14,663 per tonne, down 78.3%
  • Spodumene 6%: US$1,580 per tonne, down 64%.

As my Fool colleague James reports, Goldman is expecting lithium prices to continue falling in 2024.

For 2024, the broker is forecasting:

  • Lithium carbonate: US$13,377 per tonne
  • Lithium hydroxide: US$14,263 per tonne
  • Spodumene 6%: US$1,250 per tonne

The broker reckons lithium prices will bottom out in 2025.

Are the short sellers right?

It's important to remember that short sellers are looking for short-term rewards. They're typically betting on a downward price movement in the near future.

Meantime, lithium has a long runway ahead in the decarbonisation era.

Demand for the white metal is being powered by electric vehicle (EV) manufacturing, which is still in its infancy as an industry.

Reuters quoted Pilbara Minerals CEO Dale Henderson as saying: "Demand is absolutely there. It's just a case of moderating pricing. It's still a very healthy market."

So, what do some of the big brokers think of Pilbara Minerals shares?

Analysts at Macquarie say Pilbara has a strong balance sheet, a high-quality asset base, and a good track record for project execution.

They appear to disagree with the short sellers.

Last week, they retained their outperform rating on the ASX lithium stock with a 12-month share price target of $7.10.

That's almost double where Pilbara Minerals shares are trading today.

Morgans is also enthusiastic, with analysts rating Pilbara Minerals as their best pick of the lithium pure-plays due to its strong funding and long resource life.

They describe Pilbara as "an established Australian operator with multiple growth options ahead of it".

Morgans has an add rating on Pilbara Minerals and a $5 price target on its shares.

For more insights, my colleague Tristan discusses the outlook for ASX lithium shares in 2024 and his own views on the pros and cons of buying Pilbara Minerals shares today.

Motley Fool contributor Bronwyn Allen has positions in Macquarie Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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