Liontown Ltd (ASX: LTR) shares are down around 2.5% and trading at $1.86 a piece in Tuesday afternoon trade.
Today's decline means the ASX 200 lithium shares have now crashed 30% from a three-year high recorded in early May.
Thankfully, after a strong start to the year, the shares are still 14% higher year to date and a huge 181% higher than 12 months ago.
For context, the S&P/ASX 200 Index (ASX: XJO) is up around 0.1% today and around 1% higher for the year to date.
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What happened to Liontown shares?
ASX lithium mining shares like Liontown experienced a strong uptick in the first few months of 2026, driven by resurging lithium prices and soaring investor sentiment.
Liontown rode the lithium rebound, and at the same time, investors have been pleased with the company's production growth potential. It looks like investors leaned into Liontown shares this year on the pretence that it has a long-term ability to benefit from strong lithium pricing and expanding global EV demand.
The miner's development pipeline and exposure to future supply chains have also attracted investor attention.
But while the commodity boom is a strong tailwind for the miner, there is also a drawback.
Liontown is practically a pure-play lithium miner, and its assets are overwhelmingly lithium-focused. This means it is sensitive to and heavily dependent on lithium price trajectories.
If the price rally starts to reverse, the business is at risk.
And that's exactly what has played out in Liontown's share price.
Trading Economics data shows that lithium carbonate prices spiked to a multi-year high in mid-May. But now prices have dropped to around CNY157,000 (approx. AU$33,210) per tonne, the lowest level in ten weeks, following speculation that one of the world's largest lithium mines could resume operations soon.
Trading Economics explained that Contemporary Amperex Technology's Jianxiawo mine in Jiangxi province was suspended last year due to permitting issues. But there has been a recent government notice about a preliminary land assessment. And this has fueled expectations that the site could restart in the second half of 2026.
The concern is that a potential restart could weigh heavily on prices at a time when the market is still concerned about global lithium oversupply. This, combined with overall sector-wide weakness, can continue driving the lithium stock lower.
The question now is, what can we expect from Liontown shares next?
Are the shares a buy, sell, or hold now?
Analysts are divided about the outlook for the lithium miner over the next year.
TradingView data shows that sentiment is split. Out of 12 analysts, five have a strong buy rating, four rate the miner as a hold, and three have a sell or strong sell stance.
The average $2.20 target price, however, implies a potential 17% upside at the time of writing.
But the range between the minimum and maximum target prices is huge. Some tip the shares to crash another 50% to just 95 cents, while the more bullish of the bunch think there is potential for Liontown shares to climb another 60% to $3 each.
