Why the Liontown share price could jump 25%+

Here's what Goldman Sachs is saying about this lithium stock.

| More on:
Three people in a corporate office pour over a tablet, ready to invest.

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

The Liontown Resources Ltd (ASX: LTR) share price has been having a tough time over the last 12 months.

So much so, the lithium developer's shares were the worst performers on the ASX 200 index.

During the period, the company's shares lost a whopping 68% of their value. This means that if you had invested $10,000 into Liontown at the start of the financial year, you would have ended up with just $3,200.

Has this created a buying opportunity for investors? Let's take a look at what analysts at Goldman Sachs are saying about the company.

Liontown share price could jump 25%+

Analysts at Goldman Sachs have been looking at the company following its recent funding update.

And while the broker is not willing to put a buy rating on its shares right now, it does see a lot of value in the Liontown share price at current levels.

The note reveals that Goldman has reaffirmed its neutral rating with a trimmed price target of $1.15 (from $1.35). Based on its current share price of 91 cents, this implies potential upside of 26% over the next 12 months.

Goldman believes funding risks are now out of the way and cost and ramp up risks are priced in. It said:

Though perceived funding risks are largely alleviated, and cost/ramp up risks appear increasingly priced in, we rate LTR a Neutral on valuation, where LTR is trading at a discount to our revised NAV at ~0.85x, and an implied LT spodumene price of ~US$1,070/t (in line with peers at ~0.85x & ~US$1,080/t), though with significant potential valuation uplift from de-risking/valuation roll-forward.

Speaking of costs, the broker went into further detail about its operating costs, which are expected to be updated in the near future. It adds:

While the ramp up of the underground (UG) mine (first ore late CY24) and associated costs remain a key perceived risk for the stock (from our investor discussions), we see this risk as more modest and increasingly priced in on the current mine development/extraction plan. While LTR has not given updated cost estimates (noting processing is set to start in July and optimisation studies are ongoing; last update Oct-23), we update our estimate of underground mining/unit costs based on our bottom-up quarterly analysis of listed Australian gold assets, where we find escalation of underground mining costs has begun to ease, on average, with underground unit costs showing signs of broadly flat to only modest increases since LTR's last cost update.

All in all, things could be looking up for Liontown and its share price. Though, investors may want to keep their powder dry until the company updates its costs and ramps up production successfully.

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.

More on Materials Shares

A male sharemarket analyst sits at his desk looking intently at his laptop with two other monitors next to him showing stock price movements
Materials Shares

Here's the earnings forecast to 2029 for Liontown shares

When will this lithium developer turn a profit? Let's find out.

Read more »

An unhappy investor holding his eyes while watching a falling ASX share price on a computer screen.
Materials Shares

Why did the Core Lithium share price crash 90% in FY 2024

Core Lithium shares were in a sharp downtrend throughout FY 2024. But why?

Read more »

a man in a business suite throws his arms open wide above his head and raises his face with his mouth open in celebration in front of a background of an illuminated board tracking stock market movements.
Materials Shares

Top brokers agree that Lynas shares are 'undervalued'

Now could be the time to pounce on this stock according to analysts.

Read more »

A young man goes over his finances and investment portfolio at home.
Materials Shares

If I'd invested $5,000 in Pilbara Minerals shares in FY24 what would I have now?

Let's see if this lithium miner delivered the goods for investors.

Read more »

The torso view of a man dressed in black sharpening a knife.
Share Market News

ASX lithium shares: Screaming bargains or falling knives?

With some crashing as much as 90% in a year, is now the time to buy ASX lithium shares?

Read more »

Miner and company person analysing results of a mining company.
Materials Shares

Fortescue shares red-hot as court reveals company espionage

Fortescue's intellectual property legal pursuit descends into professional spying.

Read more »

A bored woman looking at her computer, it's bad news.
Materials Shares

Down 42%: Are Pilbara Minerals shares good value now?

Here's what Bell Potter is saying about this beaten down mining stock

Read more »

woman and two men in hardhats talking at mine site
Materials Shares

Which ASX lithium shares are financially primed to survive this rut?

Are some of the most popular ASX lithium shares at risk of succumbing to a tough environment?

Read more »