Liontown Resources Ltd (ASX: LTR) shares have faced a tough past year. From the 12 months to June 11, they lost 66% of their value.
Since entering the new financial year, the story is a little different. The stock is up 14% since July 1 and has surged 10% this week so far.
They currently fetch $1.02 apiece, more than 6% higher than yesterday's close. The chart below shows the last twelve months of Liontown's share price action.
Do the experts say Liontown is a buy? Here's a look.
Recent developments for Liontown shares
Liontown has made substantial progress towards transitioning from a lithium developer to a miner. As a reminder, the company's crown jewel is its Kathleen Valley Lithium Project.
Production is set to commence at the site, which could be a tailwind if successful, in my view.
In July, the company also secured a US$250 million convertible note agreement with LG Energy Solution to fund the development of its Kathleen Valley project.
After this transaction, it will have cash of around A$501 million, with $120 million set to be immediately invested into Kathleen Valley.
The remaining A$381 million and "additional liquidity provides balance sheet strength" for the site, it says.
What do analysts say?
Bell Potter is bullish on Liontown shares and praises the funding arrangement with LG Energy Solution. The broker reckons it removes some of the negative terms associated with undertaking traditional bank debt.
Goldman Sachs, on the other hand, recently provided a cautious earnings forecast for Liontown, considering its bearish outlook on lithium prices.
The firm estimates a gradual increase in revenue and profitability for Liontown from FY25 to FY29.
According to my colleague James' analysis, the broker expects revenue of $143 million in FY25, leading to a loss of $162 million.
By FY 2029, Goldman forecasts revenue to reach $1,326 million, with a profit of $330 million.
These estimates reflect a significant growth trajectory as estimated production ramps up and operational efficiencies improve.
Despite this, Goldman Sachs holds a neutral rating on Liontown shares with a price target of $1.15, noting:
For LTR, though we expect more modest cost escalation based on our benchmarking we remain Neutral on relative valuation.
Although it acknowledges the potential valuation uplift from de-risking and improved lithium pricing, it still advises caution until production and cost management are clearer.
Bell Potter, however, is more optimistic, maintaining a speculative buy rating and a $1.85 price target. It says that with initial production at Kathleen Valley on the way, Liontown shares are well positioned, according to my colleague James.
Meanwhile, according to CommSec, the consensus of analyst ratings says Liontown is a hold.
Foolish takeaway
Liontown Resources is at a critical juncture. With production set to start soon, the company could see significant growth if it manages costs effectively and ramps up production smoothly.
While Goldman Sachs advises caution, Bell Potter's bullish outlook suggests substantial upside potential. Based on this, there are risks in owning this stock before it successfully starts production, in my view.
In any case, it's essential to conduct your own due diligence and seek financial advice when necessary.
