On Monday, Pilbara Minerals Ltd (ASX: PLS) shares were under pressure after the lithium miner released a profit update.
The team at Bell Potter has been looking at the update and has come to the conclusion that the share price weakness is another buying opportunity for investors.
What is the broker saying about Pilbara Minerals shares?
As a reminder, Pilbara Minerals revealed that for the underlying Pilgangoora operation, it expects to report group underlying earnings before interest, tax depreciation, and amortisation (EBITDA) of $71 million to $75 million for the first half.
This is down from $415 million during the prior corresponding period in FY 2024 and $1,812 million from the first half of FY 2023.
And on the bottom line, the company is expecting to record an underlying net loss of $5 million to $7 million for the half. This is down from a profit of $273 million a year ago.
Bell Potter commented:
The company expect December 2024 half-yearly underlying EBITDA of $71-75m (BP pre-update est. $80m) and an underlying net loss after tax of -$5-7m (BP pre-update est. +$13m). PLS' 1H reported EBITDA of $45-49m and statutory net loss after tax of -$68m-71m estimates incorporate ~$62m of impacts related to its downstream investments.
While a negative update, we had forecast a weak financial result. In 1H FY25, Fastmarkets' SC6 index price averaged US$830/t (the lowest level since June 2021) and Pilgangoora operations were impacted by the tie-in and commissioning of expansion projects.
The broker highlights that lithium prices have since stabilised, which bodes well for the future. Especially given its belief that lithium demand could soon start to outstrip supply.
In light of this, Bell Potter has reaffirmed its buy rating and $3.00 price target on the lithium miner. So, with Pilbara Minerals shares currently trading at $2.20, this implies potential upside of 36% for investors over the next 12 months.
To put that into context, a $10,000 investment would turn into approximately $13,600 by this time next year if Bell Potter is on the money with its recommendation.
Commenting on its buy recommendation, 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 EVdemand driven long-term market outlook. We believe higher prices are required to incentivise new sources of supply to moderate our forecast market shortfalls from 2026-27.
