Is Core Lithium stock a good buy after falling 80% in a year?

Core Lithium Ltd (ASX: CXO) stock has had a year to forget.

After rocketing almost 2,000% from late 2020 through to late 2022, the past 12 months have seen the S&P/ASX 200 Index (ASX: XJO) lithium share crash a precipitous 80%.

Today, Core Lithium stock is trading for 21 cents a share, down from $1.67 in mid-November 2022.

Much of the pain has been driven by the crashing lithium price. This saw Core suspend its lithium mining operations to conserve cash, which spooked investors and sent shares tumbling further.

So, after that kind of fall, is the ASX 200 lithium miner a bargain buy or a falling knife?

Is Core Lithium stock trading at a bargain?

For some deeper insight into that question, we turn to two industry experts.

First up, the analysts at Goldman Sachs.

Noting that Core Lithium stock is trading at a premium to its ASX 200 lithium peers, at 21 cents per share, Goldman doesn’t believe Core Lithium stock is trading at a bargain yet.

The broker has a ‘sell’ rating on the ASX 200 lithium miner with a price target of 15 cents a share. That represents a potential downside of some 29% from current levels.

Among Goldman’s other concerns, its analysts believe that any potential growth and further development of Core Lithium’s resource is “now likely longer dated”. The broker is also worried about production and development funding risks.

Next up, we turn to the fund managers over at the QVG Long-Short fund.

And they, too, aren’t ready to call Core Lithium stock a bargain.

The fund has been short on Core Lithium stock for a year, capitalising on the 80% share price fall. While QVG’s short position is now a lot smaller than it has been, the fund continues to believe Core has further to fall.

Josh Clark, one of the fund’s portfolio managers, said (courtesy of The Australian Financial Review), “We saw there was just a plethora of ‘me too’ lithium stocks with poor economics on each individual asset.”

He added:

We were never sitting there trying to work out if the lithium price was going up or down. We were trying to work out whether they had a good asset and were they going to actually make money.

While not ready to buy into Core yet, QVG said it was discussing the timing of exiting the rest of its short position in the ASX 200 lithium share.

According to Clark:

Looking at the commodity cycle, when mines start to be shut, you’re getting very, very close to the bottom. We always knew the economics were going to catch up to these companies; we just didn’t anticipate how fast.

And a lot of ASX 200 investors appear to agree with Goldman Sachs and QVG.

Core Lithium stock kicked off this week with a short interest of 13.6%, making it the third most shorted share on the ASX 200.

The post Is Core Lithium stock a good buy after falling 80% in a year? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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.

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