Here's where this expert thinks the Pilbara Minerals share price is headed next

The ASX lithium share is facing profitability headwinds.

| More on:
Miner looking at a tablet.

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

The ASX lithium share Pilbara Minerals Ltd (ASX: PLS) has suffered a significant decline in the last year and a half. As shown on the chart below, the Pilbara Minerals share price is down around 40% from May 2023.

Created with Highcharts 11.4.3Pilbara Minerals PriceZoom1M3M6MYTD1Y5Y10YALL1 May 20233 Nov 2024Zoom ▾Jul '23Oct '23Jan '24Apr '24Jul '24Oct '24Jul '23Jul '23Jan '24Jan '24Jul '24Jul '24www.fool.com.au

It's understandable why Pilbara Minerals is down so much – the lithium price has collapsed over the past two years.

In the quarterly update for the three months to September 2024, the ASX lithium share said the realised/sold price for its resources was US$682 per tonne. That was a reduction of 19% in just that three-month period. The realised price is down close to 90% from what it achieved in the three months to December 2022.

After the latest quarterly update from the lithium miner and its decision to suspend the Ngungaju plant, investors may be wondering if this is a good time to buy or not.

Expert view on the Pilbara Minerals share price

In a note, broker UBS said that the ASX lithium share reported "strong" production (220kt) and sales (215kt) in the three months to September 2024, which were around 10% ahead of expectations.

The broker also said that costs are "tracking well" as it ramps up production, though the lithium sale price was weak as expected.

UBS said the real news of the update was the Ngungaju plant being put into care and maintenance in December, downgrading FY25 production by approximately 100kt and "reducing the FY26 outlook to P850" (from P1000) "pending an improved outlook for market balance/prices".

The broker noted Pilbara Minerals is suggesting that this move could improve cash flow by around A$200 million at a price of US$700 per tonne.

UBS is expecting/waiting for more lithium supply to exit the market. But, the broker also increased its lithium recovery assumptions "given the good performance to date and turning off the lower recovery Ngungaju plant".

The broker forecasts production to jump to 1,150kt in FY27, but this growth is "very price dependent", as are decisions relating to future capital expenditures on increasing production.

Overall, UBS thinks this production reduction by Pilbara Minerals "helps solve the oversupplied market", but the world needs "more to get near a balanced market".

Rating and price target

The broker thinks that the market is still "pricing in too much". Therefore, UBS has a sell rating on Pilbara Minerals shares.

A price target is where analysts believe the share price will be trading in 12 months from now. UBS has a Pilbara Minerals share price target of $2.35, implying a possible decline of 17% over the next year.

Should you invest $1,000 in Pilbara Minerals Limited right now?

Before you buy Pilbara Minerals Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Pilbara Minerals Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 9 January 2025

Motley Fool contributor Tristan Harrison 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 Energy Shares

a man dressed in a green superhero lycra outfit stands in a crouched pose with arms outstretched as if ready to spring into action with a blue sky and oil barrels lying in the background.
Dividend Investing

Which ASX 200 energy share will pay the best dividend yield in 2025?

Will fallen share prices mean higher dividend yields for beaten-up ASX energy stocks this year?

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Energy Shares

Why are Origin Energy shares sinking today?

Let's see what is weighing on this energy company's shares today.

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Energy Shares

Guess which ASX 200 uranium stock is rocketing 14% today

Investors have been bidding this stock higher today. But why?

Read more »

A woman faces the camera with her lip raised up to the side in total confusion.
Energy Shares

Why are ASX uranium shares falling so hard on Tuesday?

AI fears are smashing uranium miners today...

Read more »

a man holds his arms out and shrugs his shoulders as if indicating he doesn't know the answer to a question he's been asked.
Energy Shares

Why did this ASX 300 energy stock just crash 22%?

Investors have been smashing the sell button today. But why?

Read more »

A man with arms spread yells as he plunges into a swimming pool.
Energy Shares

Why this $7 billion ASX 200 energy stock is falling hard today

Investors are pressuring the Aussie energy provider on Thursday. But why?

Read more »

Oil worker using a smartphone in front of an oil rig.
Energy Shares

Why is the Santos share price charging higher today?

What is giving the energy giant's shares a boost today? Let's dig deeper into things.

Read more »

Oil worker using a smartphone in front of an oil rig.
Energy Shares

Buying Santos shares? Here's the latest on this $3.2 billion deal

Santos made a major investment decision on a $3.2 billion energy project.

Read more »