It certainly has been a difficult period for Pilbara Minerals Ltd (ASX: PLS) shares.
Since peaking at $5.66 in November, as you can see below, the lithium miner's shares have crashed lower.
This has been driven by concerns that lithium demand could be softening, which could weigh on prices.
Image source: Getty Images
Broker upgrades Pilbara Minerals shares
One leading broker that believes Pilbara Minerals shares have been oversold since November is Citi.
According to a note released this morning, the broker has upgraded the lithium miner's shares to a buy rating with a $4.70 price target.
Based on where its shares are currently trading, this implies potential upside of 21% for investors over the next 12 months.
What did the broker say?
Citi believes that the "correction is overdone" and has created a buying opportunity for investors. It commented:
PLS has pulled back ~30% since November against weaker-than-expected— albeit still growing—EV sales and anticipated battery supply chain destocking. In our view, the correction is overdone and we upgrade PLS to Buy from Neutral with an unchanged A$4.70/sh target price.
And while the broker acknowledges that investors may be unsure about entering the lithium industry right now. It believes lithium prices could remain at higher levels for longer than expected.
All in all, it expects this to lead to Pilbara Minerals generating bucketloads of cash in FY 2023 and FY 2024. The broker said:
We acknowledge investor hesitation against a commodity backdrop that may have peaked however i) spot spodumene prices may hold at +US$7000/t for longer than the market expects and ii) PLS is pricing in an undemanding US$1600/t SC6 on our estimates. The pullback provides an opportunity for investors to gain exposure to a high quality, pure-play lithium stock with low jurisdictional risk and a derisked growth profile. We expect PLS to make more cash in FY23/24 than any other stock in our gold/metals coverage universe. We model first franked dividend in 2HFY23. MarQ23 news flow: P1000 and Calix calcination (midstream product) FID.
