Here's what brokers are saying about Pilbara Minerals shares

Analysts have been running the rule over this lithium giant's latest update.

| More on:
A young investor working on his ASX shares portfolio on his laptop

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

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.

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.

Motley Fool contributor James Mickleboro 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 Broker Notes

Young woman in yellow striped top with laptop raises arm in victory
Broker Notes

Buy this ASX 300 stock for 20% upside and a 6% yield

Analysts at Bell Potter think investors should be buying this stock before it's too late.

Read more »

young woman reviewing financial reports at desk with multiple computer screens
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these stocks.

Read more »

Woman in celebratory fist move looking at phone
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Broker Notes

These ASX 200 shares could rise 20% to almost 30%

Analysts are tipping these shares to deliver big returns over the next 12 months.

Read more »

Two people tired and resting after sports race.
Broker Notes

Fundie rates 2 ASX 200 stocks in short-term pain but with long-term gain potential

Blackwattle Investment Partners sees these 2 ASX 200 stocks as worthy of a buy and hold strategy.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Broker Notes

Guess which beaten down ASX share is rocketing 11% today

Why are investors buying this beaten down stock? Let's find out.

Read more »

Broker working with share prices on computers.
Broker Notes

These 3 ASX All Ords stocks just got sizeable broker upgrades

Top brokers expect strong performance from these ASX All Ords stocks.

Read more »