Pilbara Minerals Ltd (ASX: PLS) shares have been in fine form in recent months.
So much so, the ASX lithium giant's shares have doubled in value since the end of July.
This saw them end last week within sight of a new 52-week high.
Unfortunately, one leading broker is calling time on this rally and urging investors to take profit today.
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What is the broker saying?
According to a note out of Bell Potter, its analysts were impressed with the lithium miner's performance during the first quarter. Commenting on the result, the broker said:
PLS reported quarterly spodumene concentrate (SC) production of 225kt (BP est. 215kt) and sales of 214kt at 5.3% Li2O (BP est. 215kt). Lithium recoveries were 78% (Q4 FY25 72%), a group record as Pilgan Plant optimisation progressed, supporting unit costs of A$540/t FOB (down 13% QoQ, BP est. A$575/t).
It also highlights that the company has been successfully navigating a volatile lithium market. Bell Potter adds:
PLS continues to navigate a volatile lithium market environment, with several initiatives targeting cash preservation during the current weaker lithium price environment. At Pilgangoora, cost reduction and operational enhancements include the transition to an owner-operator mining fleet and the processing of higher levels of contact ('dirty') ore.
At its South Korean lithium hydroxide facility, PLS and joint venture partner POSCO have agreed to moderate production in the short term. PLS continues to advance its earlier stage projects (Colina Project in Brazil, P2000 expansion and mid-stream demonstration plant at Pilgangoora, downstream conversion partnership with Ganfeng), preparing itself to capture value on what we expect will be stronger lithium markets over the long term.
However, despite these positives, Bell Potter thinks that Pilbara Minerals' shares are now overvalued and pricing in an unrealistic long-term lithium price.
Bell Potter downgrades Pilbara Minerals shares
This morning, Bell Potter has downgraded Pilbara Minerals shares to a sell rating (from hold) with an improved price target of $2.65 (from $2.10).
Based on its current share price of $3.23, this implies potential downside of 18% over the next 12 months.
Commenting on its sell rating, the broker said:
We downgrade our recommendation to Sell (prev. Hold) following recent strong share price appreciation. We hold a positive long term lithium market outlook and acknowledge PLS' market leading position and growth optionality. However, we believe PLS' current market valuation implies an SC6 index price of over US$1,400/t into perpetuity, compared with the current price of around US$850/t.
