It hasn't been an easy 12 months for Pilbara Minerals Ltd (ASX: PLS) shareholders.
This Australian lithium stock has lost a third of its value during this time.
While that is disappointing, one leading broker believes that things are brightening for the company and its shareholders.
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What is this broker saying about this Australian stock?
According to a recent note out of Bell Potter, its analysts believe that lithium prices could be about to rebound. The broker is expecting demand to start eating into supply before then causing a supply deficit in 2026. This would be great news for this Australian stock.
Commenting on lithium prices, the broker said:
Counter to PLS' weak share price, lithium markets have stabilised and commodity prices marginally improved. We calculate that recent supply curtailments from Australian producers (including PLS) have removed around 50kt of Lithium Carbonate Equivalent from the market (around 4% of 2024 supply). On our supply-demand modelling, the cuts result in a smaller market surplus in 2025 and brings forward our estimate of a market deficit to 2026 (previously 2027).
Sales and earnings to improve
While the above is too late to save the company's FY 2025 profits, which are expected to be down significantly year on year, Bell Potter believes a big rebound is coming in FY 2026.
It is forecasting sales of $774 million and net profit after tax of $30 million this financial year. This is down 38% and 88%, respectively, year on year.
But in FY 2026, it is forecasting a 40% jump in sales to $1,084 million and a 256% lift in net profit after tax to $107 million.
After which, it expects further increases in sales to $1,537 million (+42%) and net profit to $313 million (+193%) in FY 2027.
Big return potential
Bell Potter has a buy rating and $2.95 price target on Pilbara Minerals' shares. Based on its current share price of $2.39, this implies potential upside of 23% for investors over the next 12 months.
Commenting on its bullish view of the Australian stock, the broker said:
PLS operates a low-cost asset in a tier one jurisdiction, is diversifying through the lithium value chain, and provides a clean exposure to global lithium fundamentals and sentiment. While we expect lithium prices to remain volatile, we hold a robust EV-demand driven long-term market outlook. We believe higher prices are required to incentivise new sources of supply to moderate our forecast shortfalls from 2026.
