This top broker thinks Pilbara Minerals shares are done falling

The worst days may be over the ASX lithium stock.

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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.

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.

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