The ASX lithium share Pilbara Minerals Ltd (ASX: PLS) has suffered a significant decline in the last year and a half. As shown on the chart below, the Pilbara Minerals share price is down around 40% from May 2023.
It's understandable why Pilbara Minerals is down so much – the lithium price has collapsed over the past two years.
In the quarterly update for the three months to September 2024, the ASX lithium share said the realised/sold price for its resources was US$682 per tonne. That was a reduction of 19% in just that three-month period. The realised price is down close to 90% from what it achieved in the three months to December 2022.
After the latest quarterly update from the lithium miner and its decision to suspend the Ngungaju plant, investors may be wondering if this is a good time to buy or not.
Image source: Getty Images
Expert view on the Pilbara Minerals share price
In a note, broker UBS said that the ASX lithium share reported "strong" production (220kt) and sales (215kt) in the three months to September 2024, which were around 10% ahead of expectations.
The broker also said that costs are "tracking well" as it ramps up production, though the lithium sale price was weak as expected.
UBS said the real news of the update was the Ngungaju plant being put into care and maintenance in December, downgrading FY25 production by approximately 100kt and "reducing the FY26 outlook to P850" (from P1000) "pending an improved outlook for market balance/prices".
The broker noted Pilbara Minerals is suggesting that this move could improve cash flow by around A$200 million at a price of US$700 per tonne.
UBS is expecting/waiting for more lithium supply to exit the market. But, the broker also increased its lithium recovery assumptions "given the good performance to date and turning off the lower recovery Ngungaju plant".
The broker forecasts production to jump to 1,150kt in FY27, but this growth is "very price dependent", as are decisions relating to future capital expenditures on increasing production.
Overall, UBS thinks this production reduction by Pilbara Minerals "helps solve the oversupplied market", but the world needs "more to get near a balanced market".
Rating and price target
The broker thinks that the market is still "pricing in too much". Therefore, UBS has a sell rating on Pilbara Minerals shares.
A price target is where analysts believe the share price will be trading in 12 months from now. UBS has a Pilbara Minerals share price target of $2.35, implying a possible decline of 17% over the next year.
