Like all of its peers, S&P/ASX 200 Index (ASX: XJO) lithium stock Liontown Resources Ltd (ASX: LTR) has been struggling amid the collapse in global lithium prices.
Liontown shares closed down 0.3% yesterday to end the day trading at 78 cents apiece.
That sees shares in the ASX lithium miner down a painful 54% in 2024. A year in which the benchmark index has so far gained 10%.
Despite that big fall, Sequoia Wealth Management's Peter Day doesn't believe Liontown shares represents a bargain just yet (courtesy of The Bull).
Here's why.
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Time to sell the ASX 200 lithium stock?
"The company has revised plans for its flagship Kathleen Valley lithium project in response to a supply glut slashing lithium prices since 2023," said Day, who has a sell recommendation on the ASX 200 lithium stock.
Day noted that:
The plan now includes a production rate of 2.8 million tonnes per annum from the end of fiscal year 2027. This spodumene concentrate producer expects up to $100 million in cost reductions and deferrals as part of its business optimisation program.
Commenting on that new plan in a company update on 11 November, Liontown CEO Tony Ottaviano said, "Through the business optimisation work done by our team, the revised mine plan and guidance demonstrates our responsiveness to the low-price environment."
But Day points to the recent core financial numbers as reasons to steer clear of the ASX 200 lithium stock.
"The company reported a statutory net loss after tax of $64.918 million in fiscal year 2024. The shares have fallen from $1.69 on January 2 to trade at 79.5 cents on November 21," he said.
And he doesn't expect the outlook for Liontown shares to improve soon.
"Low lithium prices clouds the outlook for producers," Day said.
What's the latest from Liontown?
Yesterday was a big day for the ASX 200 lithium stock with the company holding its annual general meeting (AGM).
Liontown chairman Tim Goyder noted that FY 2024 "has been a year of delivery that has positioned Liontown for long-term success as we become a globally significant lithium producer".
He added that the miner will continue to deliver by "applying the same discipline to our ramp up and ongoing operations as we did during the development, construction and commissioning of Kathleen Valley".
Addressing the elephant in the room that's been smashing the ASX 200 lithium stock, Goyder said:
The depth and speed of the fall of the lithium price surprised many.
The continued lower pricing levels, which are expected to endure throughout financial year 2025, meant we have had to pivot as a company and redesign our mine to prioritise higher margin underground ore while reducing our operating and capital costs.
