The Pilbara Minerals Ltd (ASX: PLS) share price closed 0.5% lower yesterday.
The decline came off the back of a small share price increase on Monday when the lithium miner posted its FY25 results.
The company revealed a 39% drop in revenue for FY25, driven by a 43% decrease in the average realised price Pilbara received for its lithium to US$672 per tonne (CIF China) on a SC5.3% basis.
The miner also suffered an 83% drop in EBITDA over the year.
It wasn't all bad news though. Pilbara Minerals also posted a 4% year-on-year increase in spodumene concentrate (a lithium-bearing mineral) production to a record 754,600 tonnes. Its sales of the mineral were also 7% higher.
It looked like investors weren't too concerned about the results initially, but a quick drop in the share price yesterday suggests that might have been short-lived.
In a recent note to investors, Macquarie Group Ltd (ASX: MQG) revealed what it expects from the lithium giant next.
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What next for Pilbara Minerals' shares?
In its note, the broker confirmed its outperform rating on the stock. It also raised its target price to $2.20, up from $1.90 last month.
At the time of writing that represents a potential 2.3% increase for investors over the next 12 months.
"Lifting price realisation assumptions and higher production estimates have translated to material increase to our earnings forecast (thin numbers). EPS increases 76%/42%/107%/25% for FY26E/FY27E/FY28E/FY29E," the broker said in its note.
We increase our price target by 16% to A$2.20/share on improved earnings outlook and higher than expected cash balances.
At the end of FY25, Pilbara Minerals had cash of A$1 billion, and net cash of A$300,000 (including lease liabilities).
"The company boasts a solid balance sheet, which is better than many lithium peers listed on ASX and North America," the broker said.
Macquarie also said that it expects the lithium market to remain volatile in the near term with regulatory changes impacting CHN Li production in September.
The recent suspension of a large lithium mine in China has ignited market sentiment and pushed lithium prices higher. Additional news flow and regulatory updates could alter the production outlook for another 7 lepidolite mines, potentially increasing market volatility by mid-Sep. We have lifted our price realisation by 20-40% for FY26 given the spot price is well above our prior base case forecast.
Despite production concerns Macquarie said Pilbara Minerals remains "our preferred lithium producer given its operating leverage and solid balance sheet."
