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.

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It was a difficult 12 months for Pilbara Minerals Ltd (ASX: PLS) shares in the last financial year.

During the period, the lithium miner's shares lost 37% of their value.

This means that a $5,000 investment in the company's shares at the start of FY 2024 would have turned into approximately $3,150.

Whereas the same investment in the Vanguard Australian Shares Index ETF (ASX: VAS) would have become $5,375. And that's not including the dividends the ETF paid out over the 12 months.

What happened to Pilbara Minerals shares in FY 2024?

Investors were selling ASX lithium stocks in the last financial year after battery materials prices continued to fall.

In 2022, the lithium carbonate price averaged US$63,232 a tonne and the lithium spodumene (6%) price averaged US$4,368 a tonne. These high prices were underpinned by insatiable demand and supply shortages.

Cracks started to form in 2023, which led to these battery making ingredients averaging US$32,694 a tonne and US$3,712 a tonne, respectively.

Since then, prices have been in free fall. So much so, spot prices (in China) were US$11,167 a tonne for lithium carbonate and US$1,060 a tonne for spodumene 6% this month.

And while the company's operations remain profitable at these levels thanks to their low costs of A$900 per tonne (CIF), the amount of profit Pilbara Minerals is likely to make this year is now nowhere near the levels that the market was forecasting 12 months ago. And hopes of a generous dividend this year have been wiped out.

Making things worse, and putting more pressure on Pilbara Minerals shares, is that analysts believe a lithium surplus will keep prices at these low levels for several years. This could mean a tough few years for the company and its shareholders.

Should you buy the dip?

While analysts at Bell Potter see value emerging, there's not enough on the table to justify a buy rating at this point. The broker has a hold rating and $3.40 price target on its shares. It commented:

PLS is a large, liquid and clean exposure to global lithium fundamentals and sentiment. PLS is a low-cost producer, it operates in a tier one jurisdiction in Western Australia, and has a strong balance sheet ($1.8b net cash at 31 March 2024) which can withstand weaker lithium prices and support expansion programs. We are confident that EV-led demand will see strong long-term lithium market fundamentals. However, weak near-term lithium market sentiment results in us retaining our Hold recommendation.

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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