Up 75% since mid-June, is it too late to invest in Pilbara Minerals shares?

The Pilbara Minerals Ltd (ASX: PLS) share price has gone nuts. It has risen by 75% since the middle of June.

Amazingly, the price of the ASX lithium share is flat for 2022. The business has simply recovered the ground it lost earlier in the year when fears about inflation and rising interest rates spiked, causing Pilbara Minerals shares to fall to around $2.

But, investors soon got over that negativity. Particularly as the business managed to tell the market that lithium prices remain strong.

Ongoing lithium price strength

As a commodity business, Pilbara Minerals’ shorter-term sentiment can be dictated by changes in the resource price. If prices go higher, it can largely fall to the company’s bottom line thanks to the revenue boost but a similar cost level.

In August 2022, Pilbara revealed the result of its eighth Battery Material Exchange (BMX) platform. A cargo of 5,000 dry metric tonnes at a target grade of around 5.5% lithia was presented for sale on the digital platform, with a mid-September 2022 delivery.

The miner said:

Strong interest continues to be received in both participation and bidding by a broad range of qualified buyers with a total of 67 bids received online.

Pilbara said it intends to accept the highest bid of US$6,350 per dmt.

Strong result

In the FY22 result, Pilbara Minerals reported that its revenue soared 577% to around $1.2 billion, up from $175.8 million.

The business generated $814.5 million of earnings before interest, tax, depreciation and amortisation (EBITDA) and $561.8 million of statutory net profit after tax (NPAT).

The company outlined a very confident outlook. Pilbara Minerals managing director and CEO Dale Henderson said:

Having recently approved the expansion to grow production by a further 100,000 tonnes per annum to a combined approximate 640,000 tonnes to 680,000 tonnes per annum, and with the company now progressing towards a final investment decision to expand production to 1 million tonnes per annum, Pilbara Minerals commences FY23 in an exceptionally strong position.

The business is in an enviable position, supplying product into a burgeoning growth market with a clear pathway for further production growth off a performing operating base. Further, chemicals participation with our downstream JV with POSCO and our midstream project provides another extension of value creation for our shareholders. A very exciting future lies ahead for our business and our shareholders.

Is the Pilbara Minerals share price a buy?

I certainly believe Pilbara Minerals can keep growing its profit thanks to the increasing demand for lithium. The midstream project seems very promising for the ASX lithium share to boost its margins. If lithium prices stay stronger, FY23 could be another good year.

Brokers are mixed on what happens next.

UBS has a sell rating on the business, with a price target of $2.60. That’s a potential fall of around 25%. It thinks there are better-value lithium plays on the ASX.

Macquarie rates it as outperform, with a price target of $5.60. That implies a possible rise of more than 50%. It’s expecting higher prices to help with stronger profits and cash flow.

The post Up 75% since mid-June, is it too late to invest in Pilbara Minerals shares? appeared first on The Motley Fool Australia.

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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 recommended Macquarie Group Limited. 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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