This ASX lithium stock is close to an all time high – can it keep rising?

ASX lithium stock PLS Group (ASX: PLS) has brought investors massive returns over the last 12 months. 

Since June last year, the stock price has risen nearly 400%.

Formerly Pilbara Minerals, PLS Group is an Australian lithium-tantalum producer positioning itself at the forefront of the rapidly growing global lithium industry. Its flagship development, the 100%-owned Pilgangoora Lithium-Tantalum Project, is located in the Pilbara region of Western Australia.

Lithium rebound

This rise has been driven by a strong recovery in lithium prices and renewed optimism in the sector. 

The market has become more optimistic about demand from:

• Electric vehicles
• Grid-scale battery storage
• Residential energy storage systems. 

PLS also significantly increased production at its Pilgangoora operation. 

Record output and stronger recovery rates showed the company could generate more tonnes when the market improved. This higher production gives more leverage to rising lithium prices. 

With PLS shares now sitting close to all-time highs, investors may be wondering if the strong run can continue. 

A new report from Bell Potter has provided an updated outlook on what could be to come over the next 12 months. 

Long-term fundamentals strong

According to Bell Potter, after reviewing future supply and demand, it believes new mine supply is unlikely to grow fast enough to meet expected demand growth from EVs and battery storage.

At current lithium market prices, PLS will generate substantial earnings and cash flow with the restart of the 200ktpa Ngungaju processing plant. P2000 and Colina development studies are being progressed, providing substantial organic growth optionality in markets with strong underlying EV and BESS-led long term demand fundamentals.

The higher lithium price outlook flows directly into higher profits, leading Bell Potter to increase its earnings forecasts for PLS by 12% for FY26, 14% for FY27, and 34% for FY28.

The broker also said FY26 production guidance looks cautious. Management’s guidance implies lithium concentrate production could fall in the final quarter. 

However Bell Potter expects production to be stronger than guidance suggests and forecasts 872kt for FY26, above what the market may be assuming.

Costs are likely to rise modestly due to restarting the Ngungaju plant and higher diesel prices, but operating costs remain under control and are tracking near the lower end of guidance.

Hold recommendation 

Despite the positive outlook, Bell Potter has retained its hold recommendation on this ASX lithium stock. 

The broker has increased its price target to $6.15 (previously $5.50). 

However, this target is 5% below current levels, suggesting the ASX lithium stock could slide from here.

The post This ASX lithium stock is close to an all time high – can it keep rising? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Bell 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.