Why broker JP Morgan just upgraded the Pilbara Minerals share price

Is a broker's call the reason for the lithium miner's strong rise?

| More on:
a man leans back in his chair with his arms supporting his head as he smiles a satisfied smile while sitting at his desk with his laptop computer open in front of him.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Pilbara Minerals is a strong performer today, up more than 6%
  • The lithium miner has received another positive broker upgrade, this time from JP Morgan
  • It’s also currently benefiting from strong lithium prices

The Pilbara Minerals Ltd (ASX: PLS) share price has shot higher today. It's currently up by more than 6%.

This means it's now around 36% higher over the past month and has gone up 90% since the middle of June 2022.

While some of the increase in recent weeks may simply be a reversal of the declines seen earlier in the year, the company is now trading higher than it was before.

So, what could be causing the latest gains?

Brokers are still positive on the Pilbara Minerals share price

According to reporting by The Australian, the broker JP Morgan has decided that the ASX lithium share still has further upside.

The analyst Lydon Fagan from JP Morgan has upgraded the business to an outperform rating and has lifted the price target by another 17% to $4.10. A price target is where the broker thinks the share price will be trading in 12 months from the date of the rating.

A key reason for the increase in the price target is that JP Morgan has increased its long-term estimates for lithium prices because of a "steeper cost curve to incentivise low-grade Chinese supply to fill the supply-demand gap."

The broker thinks that the lithium market could be undersupplied until 2025. That means the relationship between supply and demand could favour Pilbara Minerals for a while yet.

JP Morgan has increased its long-term forecast for lithium carbonate and spodumene prices — they were increased by 20% and 25% respectively.

Electric vehicle demand is likely to grow in the longer term, but supply chain issues and a recession could hurt growth.

The price target of $4.10 implies a possible rise of around 5% over the next year from the current level.

Another positive rating

JP Morgan isn't the only broker positive on further gains for Pilbara Minerals.

Macquarie also rates the ASX lithium share as outperform. But it has a much stronger outlook for the Pilbara Minerals share price. Macquarie's price target is $5.60. This implies a possible rise of more than 40%.

The reason for Macquarie's optimism is that Pilbara Minerals is predicting that its production could increase by more than half in FY23. When combined with the high lithium price, this combination is expected to lead to a significant rise in net profit after tax (NPAT) and cash flow.

Pilbara Minerals share price snapshot

Over the last six months, the lithium miner's share price has risen by around 40%.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Gainers

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why Fortescue, Lynas, PEXA, and Regis Healthcare shares are charging higher

These shares are having a strong session on Thursday. But why?

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Share Gainers

Why Capricorn Metals, Insignia, Perseus Mining, and Qoria shares are storming higher

These shares are having a strong session on Tuesday. But why?

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Amaero, AMP, Block, and South32 shares are racing higher today

These shares are starting the week on a positive note. But why?

Read more »

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another momentous session for ASX shares this Friday.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why BHP, Catalyst Metals, Mesoblast, and Pilbara Minerals shares are shooting higher

These shares are ending the week with a bang. But why?

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »