Pilbara Minerals Ltd (ASX: PLS) shares have been on a wild ride this year.
The lithium miner's shares have been as high as $4.58 and as low as $2.31.
They then finished yesterday's session near the middle of this range at $3.10.
Where next for Pilbara Minerals shares?
The team at Bell Potter has been busy looking at the lithium industry and where it thinks lithium prices are heading from here.
Unfortunately, it has become less bullish on the battery making ingredient and has trimmed its price estimates for the near term due to delayed supply deficits. It explains:
We have downgraded our lithium price outlook: Spodumene concentrate 6% Li2O now US$1,050/t in 2025 (previously US$1,400/t) trending higher to LT US$1,500/t in 2028 (previously US$1,600/t); Lithium carbonate now US$12,500/t in 2025 (previously US$20,000/t) trending higher to LT US$20,000/t in 2028 (previously US$22,500/t). The downgrades are based on our updated lithium supply-demand outlook, now expecting supply deficits to emerge in 2027 (previously 2026). The result is marginal cost supported prices over 2025 before higher incentive prices from 2026.
In light of this and in response to a site visit, the broker has downgraded its earnings per share estimates for the coming years. It adds:
EPS changes are the result of our updated price outlook and model adjustments following our recent Pilgangoora site visit: FY25 -62%; FY26 -69%; and FY27 -44%.
Bell Potter expects earnings per share of 1.6 cents in FY 2025, 5.2 cents in FY 2026, and then 11.3 cents in FY 2027.
Valuation reduced
In response to the above, the broker has reaffirmed its hold rating on Pilbara Minerals' shares with a trimmed price target of $3.00 (from $3.15). This is approximately 3% below where the lithium miner's shares are currently trading.
And while the broker does like Pilbara Minerals, it just doesn't see enough value in its shares to create a compelling risk/reward. Commenting on its hold rating, the broker said:
PLS operates a low-cost asset in a tier one jurisdiction, is diversifying through the lithium value chain, and has a strong balance sheet ($1.6b cash at 30 June 2024) that can support expansion projects through sustained periods of market weakness. It offers a clean exposure to global lithium fundamentals and sentiment. On our updated valuation, we maintain our hold recommendation.
All in all, Bell Potter appears to believe that it could be worth keeping your powder dry until a better entry point is created.
