Liontown Resources Ltd (ASX: LTR) has had a phenomenal year, with the lithium mining company's share price up 82% so far this year. Investors may wonder whether there is still room to run for Liontown shares, but analysts at Macquarie are not bullish on Liontown.
The broker has kept its underperform rating on the lithium miner and maintained a 12-month price target of $0.65, suggesting the share price could fall around 38% from the current level of $1.05.
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What Macquarie said about Liontown
Macquarie acknowledged that Liontown delivered a stronger production result than expected in the September quarter. The company produced 87,200 tonnes of spodumene concentrate, which was 29% above market forecasts, and sold 77,500 tonnes, 12% ahead of expectations.
Production grades and costs also came in better than expected. Operating costs were A$1,093 per tonne, around 14% lower than analysts had forecast. However, the good news (from Macquarie's point of view at least) largely stops there.
Liontown realised an average selling price of just US$700 per tonne for its spodumene concentrate, which is roughly 20% lower than Pilbara Minerals Ltd (ASX: PLS) achieved in the same period. On a comparable grade basis, the realised price was US$583 per tonne, about 12% below consensus estimates. That weaker pricing saw quarterly revenue come in 6% below expectations at A$68 million.
Why Macquarie remains cautious
While the company's Kathleen Valley project is ramping up and performing well operationally, Macquarie said the stock still looks expensive. At current levels, the broker estimates Liontown is trading at an implied spodumene price of around US$1,270 per tonne, which is 34% higher than current spot prices.
In simple terms, the current Liontown share price is already pricing in a strong recovery in lithium prices, and that is something Macquarie isn't confident will happen soon. As a result, the broker trimmed its FY26 earnings forecasts by about 7% and left its valuation unchanged.
Macquarie expects the Kathleen Valley underground mine to reach its full run rate of 2.8 million tonnes a year by FY27, but notes that profitability remains highly sensitive to lithium prices.
The bottom line
Macquarie's view is that Liontown shares are likely to underperform at current levels. Despite operational improvements, the broker believes the company's valuation doesn't reflect the weakness in lithium prices. Investors who expect a quick recovery in the lithium market may see opportunity here, but Macquarie thinks patience is warranted and that Liontown shares could face more downside before they become a bargain.
