This top broker thinks Pilbara Minerals shares are done falling

The worst days may be over the ASX lithium stock.

| More on:

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 ASX lithium share Pilbara Minerals Ltd (ASX: PLS) share price has been through enormous pain in the last year. As shown in the chart below, it's down close to 40% over the past 12 months.

Brokers, such as UBS, have been worrying about the company's valuation in recent times. The latest UBS notes suggest that the Pilbara Minerals share price implied a higher lithium price than the broker thought was possible for the foreseeable future.

Since 20 May 2024, the Pilbara Minerals share price has dropped close to 30%. Shareholders may be worrying about whether the ASX lithium share will keep on sinking. But there may be some light at the end of the tunnel.

a man with a moustache sits at his computer with his hands over his eyes making a gap between his fingers so he can peek through to his computer screen.

Image source: Getty Images

Broker upgrade on Pilbara Minerals shares

According to reporting by The Australian, JPMorgan analyst Al Harvey upgraded the rating on Pilbara Minerals shares to neutral from underweight. In other words, it's gone from a sell to a neutral rating in the minds of JPMorgan's analysts.

The Australian said JPMorgan's 12-month Pilbara Minerals share price target on the ASX lithium share was $2.95. Since that is virtually where it is today, JPMorgan is essentially suggesting that the Pilbara Minerals share price has finished falling.

Of course, a price target is just a broker's best guess of where the share price is going to be in 12 months from now. The share price could be better – or worse – than what the broker expects.

Are any brokers optimistic about the ASX lithium miner?

According to Factset, seven analysts currently rate Pilbara Minerals as a buy, six have neutral ratings, and seven have sell ratings.

That's a very mixed group of ratings on the company. While the consensus/average rating is a hold, there are more buy ratings and sell ratings than hold ratings.

Forecast for FY24 results

Regarding the lithium price, the broker UBS thinks "continued downside risk remains while supply out of Africa is strong and demand for PHEV [plug-in hybrid electric vehicles] stagnates".

According to UBS numbers, Pilbara Minerals is still pricing in a rebound in the lithium price. However, UBS suggests it may take a while before the price returns to its long-term forecast of US$1,400 per tonne.

Increasing supply could keep the lithium price near current marginal cost support levels, according to UBS.

The broker thinks that in FY24, Pilbara Minerals could generate revenue of $1.27 billion, $525 million of earnings before interest and tax (EBIT) and $359 million of net profit after tax (NPAT). After a year of investing in growing its production, the balance sheet could see net cash decline to $942 million.

Motley Fool contributor Tristan Harrison 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 Energy Shares

Worker on a laptop at an oil and gas pipeline.
Energy Shares

Woodside shares slip as WA cyclone disrupts gas operations

WA cyclone hits Woodside operations as shares edge lower.

Read more »

Hand holding out coal in front of a coal mine.
Energy Shares

Why New Hope, Yancoal and Whitehaven shares are storming higher on Friday

Investors are piling into New Hope, Yancoal, and Whitehaven shares in Friday’s falling market. But why?

Read more »

An oil refinery worker stands in front of an oil rig with his arms crossed and a smile on his face.
Energy Shares

New ratings on 4 ASX 200 energy shares: experts

Leading brokers have recently updated their ratings and 12-month share price targets.

Read more »

Oil worker giving a thumbs up in an oil field.
Energy Shares

Which emerging ASX gas producer could deliver almost 80% gains?

This NT-focused gas company has a big year ahead of it.

Read more »

Black barrels of oil in ascending and then descending sizes with a red arrow pointing down to indicate a falling oil price.
Energy Shares

Why are ASX 200 energy shares tumbling today?

The Brent Crude oil price slipped below US$100 per barrel today.

Read more »

A rueful woman tucks into a sweet pie as she contemplates a decision with regret.
Energy Shares

Why is this ASX 300 energy share crashing 42% on Wednesday?

Investors are pummelling the ASX energy share on Wednesday. But why?

Read more »

Excited couple celebrating success while looking at smartphone.
Broker Notes

Up 222% in a year, why this ASX energy share is forecast to more than double your money again

A leading broker forecasts more outsized gains to come from this rocketing ASX energy share. But why?

Read more »

Young ASX share investor excitedly throwing hands up in front of savings jar.
Energy Shares

$7,500 invested in New Hope shares 5 weeks ago is now worth…

Strong coal prices lift New Hope shares over a five week period.

Read more »