What happened to Pilbara Minerals shares in May?

Did this lithium miner outperform or underperform last month?

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In May, the S&P/ASX 200 Index (ASX: XJO) managed to carve out a small gain for investors despite a selloff late in the month due to inflation concerns.

Unfortunately, Pilbara Minerals Ltd (ASX: PLS) shares didn't fare as well and dropped into the red during the month.

How did Pilbara Minerals shares perform in May?

The lithium miner's shares started the month positively and were up as much as 3.5% month to date at one stage.

But all that was forgotten by the end of the month when Pilbara Minerals shares finished the period almost 7% below where they started it. This was despite there being no news out of the company in May.

Though, it is worth noting that it wasn't the only ASX lithium stock to tumble last month. Core Lithium Ltd (ASX: CXO) shares lost approximately 10% of their value during the period.

What else?

A bearish broker note out of Morgan Stanley could also have weighed on Pilbara Minerals shares.

Last month, it put an underweight rating and a $3.35 price target on it shares. This implies potential downside of 12.3% for investors from current levels over the next 12 months.

Its analysts continue to believe that its shares are overvalued at current levels.

Should you buy the dip?

Unfortunately, Morgan Stanley isn't alone in believing that Pilbara Minerals shares are overvalued at current levels.

The team at Goldman Sachs, for example, believes that they could fall significantly more than what its rival investment bank is predicting.

According to a recent note, the broker has a sell rating and lowly $2.80 price target on its shares. This implies a potential downside of 27% for investors between now and this time next year. It commented:

Our 12m PT is down to A$2.80/sh, where PLS (Sell) remains at a premium to peers (1.2x NAV & pricing ~US$1,300/t LT spodumene (including a nominal value of A$1.1bn for growth); peer average ~1.05x & ~US$1,210/t (lithium pure-plays ~US$1,110/t; GSe US$1,150/t LT real)), with near-term FCF continuing to decline on lithium prices and increasing growth spend (c.-10% FCF yield in FY24E, and c.0% in FY25-27E). We also continue to see risk that a Beyond P1000 expansion disappoints vs. market expectations on a combination of capex, size, or timing.

Overall, based on what the broker community is saying, it might be best for investors to keep their powder dry and wait for a better entry point. Though, of course, brokers don't always make the right call. Time will tell with this one.

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 positions in and has recommended Goldman Sachs Group. 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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