Why did Liontown Resources shares smash the market in April?

This lithium stock was roaring last month. Why did its shares outperform?

| More on:
A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Liontown Resources Ltd (ASX: LTR) shares avoided the market weakness last month.

In fact, the lithium developer's shares managed to surge 6% despite the market dropping 3% over the period.

Why did Liontown shares outperform?

There were a couple of key reasons why the Kathleen Valley Lithium Project owner's shares smashed the market.

One was the release of a positive quarterly update at the end of the month. That update revealed that the project remains on time and budget.

As a result, the company is expecting to produce its first lithium in the middle of this year. And with the project still on budget, management reiterated its belief that it has enough funds to see it through to positive free cash flow.

Liontown's Managing Director, Tony Ottaviano, described the progress the company is making as "tremendous". He said:

The March Quarter saw tremendous progress across all major work fronts at Kathleen Valley, with construction of the process plant, the critical path to first production, being 90 percent complete on an earned value basis. We remain confident in our ability to deliver our Tier-1 lithium project on budget and schedule to first production by mid-2024.

What else?

Also potentially helping Liontown shares outperform last month was that some analysts believe that its shares are dirt cheap.

For example, a recent broker note out of Bell Potter reveals that its analysts remain as bullish as ever and believe the company's shares are undervalued at current levels.

The broker currently has a speculative buy rating and a $1.85 price target on them. This implies a potential upside of approximately 48% from current levels.

This means that a $10,000 investment would turn into almost $15,000 in 12 months if Bell Potter's recommendation proves accurate. Though, it is worth remembering that its speculative buy rating means it is a high-risk option.

Commenting on the company, Bell Potter said:

LTR's 100% owned KV lithium project remains highly strategic in terms of its stage of development, long mine life and location. LTR has offtake contracts with top tier EV and battery OEMs (Ford, LG Energy Solution and Tesla). Hancock Prospecting has a 19.9% interest in LTR. Under our modelled assumptions which includes the drawdown of the $550m debt package and repayment of Ford debt, and under a more conservative spot price scenario, we expect that LTR is fully funded to free cash flow. LTR is an asset development company; our Speculative risk rating recognises this higher level of risk.

Overall, this could make Liontown shares worth considering if you're looking for lithium exposure and have a high tolerance for risk.

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.

More on Materials Shares

A woman is very excited about something she's just seen on her computer, clenching her fists and smiling broadly.
Materials Shares

Why did the Sayona Mining share price just leap 5%?

The Sayona Mining share price is smashing the benchmark today. But why?

Read more »

Man in yellow hard hat looks through binoculars as man in white hard hat stands behind him and points.
Mergers & Acquisitions

BHP shares on watch after new $74b Anglo American takeover offer rejected

Is it third time lucky for the mining giant?

Read more »

Two miners standing together.
Materials Shares

Buy one, sell the other: Goldman's verdict on these 2 ASX lithium shares

The broker says lithium prices will not bottom until 2025. Here's what you should do in the meantime.

Read more »

a construction worker sits pensively at his desk with his arm propping up his chin as he looks at his laptop computer while wearing a hard hat and visibility vest in a bunker style construction shed.
Materials Shares

Which ASX 200 stock just plunged 12% despite record full-year earnings?

It looks like an impressive report card but UBS doesn't like the FY25 guidance.

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Materials Shares

Why did this ASX All Ords stock just crash 24%?

What is weighing down this lithium stock today? Let's find out.

Read more »

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Share Fallers

Why did the Core Lithium share price just crash 6%?

Investors are bidding down the Core Lithium share price today.

Read more »

Man with rocket wings which have flames coming out of them.
Materials Shares

Bell Potter says this speculative ASX stock could rise 200%+

This stock could more than triple in value according to the broker. But it is only suitable for high risk…

Read more »

Emotional euphoric young woman giving high five to male partner, celebrating family achievement, getting bank loan approval, or financial or investing success.
Share Gainers

Guess which ASX lithium share just leapt 13% on major financing news!

Investors are bidding up the ASX lithium share on the back of major financing news.

Read more »