Pilbara Minerals Ltd (ASX: PLS) shares had a strong finish to the week.
The lithium miner's shares rose 7.5% on Friday to end the period at $4.24.
This followed the release of the company's third-quarter update, which went down well with investors despite falling short of the market's expectations.
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What are brokers saying about Pilbara Minerals shares
A number of brokers have been looking over the company's update and have given their verdict on it and Pilbara Minerals' shares.
Let's start with Citi, which wasn't expecting the market to respond positively to the release. However, with the broker believing that we could be at the end of the downstream destocking cycle, it remains positive and reiterated its buy rating and $4.60 price target. It said:
PLS reported operating cashflow of ~$920m, down 3% QoQ but better than SepQ. Cash now A$2.68bn, +0.46bn QoQ. Average selling price down 15% QoQ to US$4840/t or US$5,522 on a SC6 basis vs spot US$4671/t. PLS expects softening prices into JunQ until chemicals pricing stabilises. Production guidance is maintained with costs nudged up. Conference call is tomorrow at 9AM AEST and will likely focus on downstream strategy, pricing environment and ramp up of plant throughput. We expect a market reaction to the downside. Maintain Buy on our view that we are probably at the end of the downstream destocking cycle.
Over at Goldman Sachs, its analysts weren't overly impressed with the update. However, they retained their neutral rating with a new $4.10 price target. The broker commented:
Pilgangoora achieved an average realised price of US$4,840/t (US$5,522/t SC6.0 CIF China), down ~15% QoQ and ~10% below GSe/consensus, including a spot sale of 15kt based on a new pricing model linked to tolling lithium hydroxide. PLS anticipates continued softening of spodumene prices into the June quarter until pricing for lithium chemicals stabilises, including domestic pricing in China, with this expected to continue in the short term with pricing potentially strengthening in 2H as restocking of inventory levels in China occurs across the supply chain.
'Softer than we'd hoped'
Morgans was also disappointed but believes there's value on offer with Pilbara Minerals shares. It has retained its add rating with a reduced price target of $5.00. It said:
3Q production met expectations (-1% on forecast) but pricing was softer than we'd hoped (-5% on forecast, -15% qoq). Realised prices will continue to soften in the coming quarters and we have reduced our forecasts given weak chemical pricing. This reduces our price target to $5ps (- 6%). We still see upside to our DCF valuation and there is the potential for short-term price momentum when the Chinese market strengthens.
