What happened to Pilbara Minerals shares in May?

Did this lithium miner outperform or underperform last month?

| More on:
A man in his 30s with a clipped beard sits at his laptop on a desk with one finger to the side of his face and his chin resting on his thumb as he looks concerned while staring at his computer screen.

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

In May, the S&P/ASX 200 Index (ASX: XJO) managed to carve out a small gain for investors despite a selloff late in the month due to inflation concerns.

Unfortunately, Pilbara Minerals Ltd (ASX: PLS) shares didn't fare as well and dropped into the red during the month.

How did Pilbara Minerals shares perform in May?

The lithium miner's shares started the month positively and were up as much as 3.5% month to date at one stage.

But all that was forgotten by the end of the month when Pilbara Minerals shares finished the period almost 7% below where they started it. This was despite there being no news out of the company in May.

Though, it is worth noting that it wasn't the only ASX lithium stock to tumble last month. Core Lithium Ltd (ASX: CXO) shares lost approximately 10% of their value during the period.

What else?

A bearish broker note out of Morgan Stanley could also have weighed on Pilbara Minerals shares.

Last month, it put an underweight rating and a $3.35 price target on it shares. This implies potential downside of 12.3% for investors from current levels over the next 12 months.

Its analysts continue to believe that its shares are overvalued at current levels.

Should you buy the dip?

Unfortunately, Morgan Stanley isn't alone in believing that Pilbara Minerals shares are overvalued at current levels.

The team at Goldman Sachs, for example, believes that they could fall significantly more than what its rival investment bank is predicting.

According to a recent note, the broker has a sell rating and lowly $2.80 price target on its shares. This implies a potential downside of 27% for investors between now and this time next year. It commented:

Our 12m PT is down to A$2.80/sh, where PLS (Sell) remains at a premium to peers (1.2x NAV & pricing ~US$1,300/t LT spodumene (including a nominal value of A$1.1bn for growth); peer average ~1.05x & ~US$1,210/t (lithium pure-plays ~US$1,110/t; GSe US$1,150/t LT real)), with near-term FCF continuing to decline on lithium prices and increasing growth spend (c.-10% FCF yield in FY24E, and c.0% in FY25-27E). We also continue to see risk that a Beyond P1000 expansion disappoints vs. market expectations on a combination of capex, size, or timing.

Overall, based on what the broker community is saying, it might be best for investors to keep their powder dry and wait for a better entry point. Though, of course, brokers don't always make the right call. Time will tell with this one.

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 positions in and has recommended Goldman Sachs Group. 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

smiling worker stands before power generator technology
Materials Shares

Fortescue shares jump 5% on record performance

This mining giant was in fine form during the quarter.

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.
Materials Shares

Should you buy Pilbara Minerals shares today?

Let's see if analysts think investors should be buying the lithium giant's shares.

Read more »

Image of young successful engineer, with blueprints, notepad and digital tablet, observing the project implementation on construction site and in mine.
Materials Shares

Expert says this ASX mining stock could rise almost 30%

Let's see which miner is being tipped as a buy for investors right now.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Materials Shares

BHP shares charge higher on record copper and iron ore production

Let's see how the miner performed during the fourth quarter.

Read more »

A man stands with hands on hips surveying construction of three high-rise buildings.
Materials Shares

Building activity on the rise – will ASX materials shares benefit?

New data from the March quarter shows a sharp rise in building activity. 

Read more »

Man smiling at a laptop because of a rising share price.
Materials Shares

Macquarie predicts 11% upside for this ASX materials stock

Here's why the broker is positive on the stock.

Read more »

Miner and company person analysing results of a mining company.
Materials Shares

Rio Tinto share price falls on Q2 update

Let's see what the mining giant reported for the second quarter.

Read more »

a man in a hard hat and high visibility vest smiles as he stands in the foreground of heavy mining equipment on a mine site.
Materials Shares

Could these 3 ASX materials shares be set to double?

This broker has buy ratings and aggressive price targets for these holdings. 

Read more »