3 things that could tank the Core Lithium share price even further

Lithium prices, ongoing exploration, and short selling — it's a tough gig!

| More on:
Three rock climbers hang precariously off a steep cliff face, each connected to the other with the higher person holding on and the two below them connected by their arms and rope but not making contact with the cliff face.

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

  • After roaring higher in 2022, the Core Lithium share price has tumbled 11% so far this year to trade at 92 cents right now
  • And there's still potential for the stock to be dragged lower
  • Falling lithium prices, sour exploration results, or diminishing market sentiment could all feasibly take their toll on the ASX 200 lithium share

The Core Lithium Ltd (ASX: CXO) share price was once the envy of many S&P/ASX 200 Index (ASX: XJO) materials investors. The stock leapt 73% over the course of 2022.

However, recent months have taken their toll. The Core Lithium share price has fallen 11% year to date and is currently trading 26% lower than it was this time last year.

Right now, stock in the lithium hopeful-turned-producer is swapping hands for 92 cents a share.

Created with Highcharts 11.4.3Core Lithium PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

And I don't believe the ASX 200 share is out of the woods. Here are three things I think have the potential to send the stock lower.

3 things that could tank the Core Lithium share price

Lithium prices

Of course, the big risk to most lithium miners and hopefuls concerns the value of the battery-making material.

Since Core Lithium mainly relies on selling lithium products for income, its earnings are reliant on the commodity's value.

If the price of lithium were to fall substantially, it would probably take the company's future earnings – and likely its share price – with it.

Though eToro market analyst Josh Gilbert notes the company is braced to withstand lower prices, my Fool colleague Tony reports.

Exploration

Core Lithium kicked off spodumene concentrate production at its Finniss Lithium this year with ore mined from the operation's Grants pit.

It's also planning a second mine at the BP33 deposit and is exploring the Hang Gong deposit, as well as the Far West and Bilatos prospects. And, so far, such exploration appears to be going well.

However, active exploration brings about notable risks for a company's share price. Particularly, if future findings fail to meet the market's expectations.

Short interest and market sentiment

The final factor I think has the potential to tank the Core Lithium share price is a swing in market sentiment.

The company is already among the ASX's most shorted, with a short interest of 9.58% at last count. That means many market participants are effectively betting against the stock.

As I recently covered, rising short interest isn't necessarily a red flag. However, it can be an indication of falling market sentiment.

Meanwhile, the ASX 200 company is yet to turn a profit. That means its $1.67 billion valuation is largely based on future expectations.

Thus, a swing in market sentiment away from lithium stocks in general, or Core Lithium in particular, could prove dire for its valuation.

Motley Fool contributor Brooke Cooper 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 Materials Shares

A group of miners in hard hats sitting in a mine chatting on a break as ASX coal shares perform well today
Materials Shares

Down but not out: Can these ASX mining shares bounce back?

Here’s what one broker is predicting for Australia’s largest mining companies. 

Read more »

Broker analysing the share price.
Materials Shares

Buy, hold, or sell? Broker's verdict on 3 ASX 200 materials shares

Materials was one of four market sectors that weakened in overall value in FY25.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Materials Shares

Why is this ASX mining stock crashing 14% today?

Let's see what is causing investors to hit the sell button on Monday.

Read more »

Three miners stand together at a mine site studying documents with equipment in the background
Materials Shares

$10,000 invested in BHP shares in FY25 is now worth

Did the Big Australian outperform or underperform during the last financial year?

Read more »

A male investor sits at his desk pondering at his laptop screen with a piece of paper in his hand.
Share Market News

Why did Macquarie just downgrade Liontown resources shares?

Here’s what the broker had to say about this materials company. 

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Materials Shares

Why did Macquarie downgrade Mineral Resources shares?

The broker is no longer bullish on this mining and mining services company.

Read more »

A bricklayer peers over the top of a brick wall he is laying with a level measuring tool on top and looks critically at the work he is carrying out.
Materials Shares

Brickworks shares rise 1% on trading update

Investors seem delighted by a new update from Brickworks.

Read more »

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Materials Shares

Does Macquarie prefer Rio or BHP shares today?

Let's find out which mining giant is the better pick right now according to the broker.

Read more »