Pilbara Minerals Ltd (ASX: PLS) shares are rising on Friday.
At the time of writing, the lithium miner's shares are up 2.5% to $3.95.
Investors appear to be looking beyond yesterday's disappointing quarterly update, possibly on the belief that it was already priced in.
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Should you buy Pilbara Minerals shares?
Opinion remains divided on whether Pilbara Minerals shares are good value or fully valued right now.
For example, according to a note out of Goldman Sachs, its analysts have responded to the miner's quarterly update by retaining their neutral rating with a reduced price target of $3.80. This implies a potential downside of almost 4% from current levels.
Goldman believes that the update highlights how lower lithium prices could put pressure on its free cash flow in the near term.
Net cash declined to ~A$2.7bn with cash of ~A$3bn following the recent dividend payout, with FCF declining to <A$100mn in the quarter on declining lithium prices and increasing growth spend.
We rate PLS a Neutral relative to our coverage on valuation. While spot prices support strong FCF yields over and above planned incremental capex spend, we see near-term FCF declining on lithium prices and increasing growth spend (no FCF in FY24/25E), with the stock trading at ~1.1x NAV (in line with peer average ~1.05x), or pricing ~US$1,120/t spodumene (GSe US$1,000/t LT real).
A bullish view
Over at Morgans, its analysts are feeling cautiously optimistic and believe Pilbara Minerals shares are a buy after recent weakness.
According to the note, the broker has retained its add rating with a trimmed price target of $5.00. This suggests a potential upside of almost 27% for investors over the next 12 months.
While it wasn't overly impressed with the quarter and believes that volatility in lithium prices could weigh on sentiment in the near term, it still sees significant value on offer with its shares even after trimming its valuation.
