Liontown shares crash 8% on broker downgrade

This lithium stock has been the victim of a broker downgrade today.

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A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.

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Liontown Resources Ltd (ASX: LTR) shares are having a difficult session on Tuesday.

In afternoon trade, the lithium developer's shares are down a disappointing 8% to $1.16.

What's going on with Liontown shares today?

There are a couple of reasons why the company's shares are falling more than most today.

The first reason is weakness in the lithium industry on Tuesday. This has seen a number of ASX lithium stock tumble deep into the red.

Let's take a look at the state of play in the industry today:

  • Core Lithium Ltd (ASX: CXO) shares are down 6.5%
  • Lake Resources N.L. (ASX: LKE) shares are 7.5% lower
  • Pilbara Minerals Ltd (ASX: PLS) shares have dropped 2.5%
  • Sayona Mining Ltd (ASX: SYA) shares are down 5%

What else is weighing on its shares?

Also putting pressure on the lithium developer's shares today is news that it has been hit with a downgrade from a leading broker.

According to a note out of Citi, its analysts have downgraded Liontown's shares to a sell rating (from neutral) with a price target of $1.00.

Based on its current share price, this implies potential downside of almost 14% for investors over the next 12 months.

The broker made the move on valuation grounds after a strong rally in recent weeks took its shares beyond the broker's idea of fair value. It believes the market is currently pricing in a lithium spodumene price almost double current spot levels.

Today's decline is just another in a long run of declines that shareholders have had to endure. For example, following this latest weakness, the Liontown share price has now lost 55% of its value over the last six months.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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