Pilbara Minerals Ltd (ASX: PLS) shares have taken quite a beating over the past 12 months.
Shares in the S&P/ASX 200 Index (ASX: XJO) lithium stock closed yesterday trading for $2.97 apiece. That sees the stock down more than 41% since this time last year, when shares were swapping hands for $5.06 each.
That's a far cry from the performance we witnessed in 2021, when the lithium miner's shares leapt 288% over the calendar year.
But things began heading downhill in late 2023. That's when lithium prices fell off a cliff as surging supply growth began to outpace global demand growth for the battery-critical metal.
For longer-term investors, however, the big selldown in Pilbara Minerals shares could represent a buying opportunity. One with a potential upside of more than 66%.
That's according to Richard Coppleson, director of institutional sales and trading at Bell Potter.
According to Coppleson (quoted by The Australian Financial Review), "I own this and like it a lot. I think it's a super buy at these levels. When lithium does recover, this is back to $5; only question is when will that be?"
When will lithium prices recover?
Like most market analysts, Coppleson is confident lithium prices will recover. Until then, though, it's unlikely that Pilbara Minerals shares will rocket back to $5.
On Tuesday, lithium carbonate was trading for US$12,800 a tonne.
As for the outlook for global lithium prices, Citi forecasts that fast-building lithium inventories are likely to further pressure prices.
"This high and rising low-shelf-life chemical inventories should see lithium prices fall another 15% to 20% to $US10,000 a tonne," Citi global head of commodities research Max Layton said.
But Citi expects lithium prices could begin to pick back up in 2025. According to Layton:
A low-price environment over the next three to six months would force supply curtailments, driving physical markets to rebalance… Lithium consumption is expected to accelerate from 2025 onwards once the current negative EV sentiment fades.
Advantage Pilbara Minerals shares?
One advantage Pilbara Minerals shares could have over some of the miner's rivals is the company's comparatively low costs.
"Pilbara's relatively low unit costs have so far seen the company withstand softer pricing, providing a competitive advantage over others in the sector," CEO Dale Henderson said when Pilbara reported its half-year results in February.
And the company's balance sheet remains strong, despite revenue dropping 27% year-on-year to $192 million in the March quarter. Management noted that fall reflected "a 28% decline in average realised price partly offset by a 3% increase in sales volume".
Pilbara Minerals had a cash balance of $1.8 billion as at 31 March.
