The Pilbara Minerals share price has pulled back in the past few weeks as oversupply concerns remain. PLS stock is trading at A$2.35, which is about 42% below the highest point in 2022. This price is also close to its lowest point in December last year. It has even underperformed the ASX 200 index, which has fallen by about 10% in 2022.
Global lithium leader
Pilbara Minerals is a leading mining company that is playing an important role in the changing world today. It is an Australian company that focuses primarily on lithium, a key component of batteries. These batteries are used in the energy storage and electric vehicle (EV) industries that are in high demand.
Pilbara Minerals’ main project is Pilgangoora, which is the biggest hard rock lithium deposits in the world. It also owns other exploration projects in the Strelley, Tabba Tabba, and Wodgina districts in Australia. The firm plans to continue exploration as demand for lithium jumps around the world.
Pilbara Minerals has seen its business go parabolic in the past few years. For example, the firm’s annual revenue in 2018 was just $7.5 million. By 2021, the firm’s revenue soared to more than $131 million.
According to SeekingAlpha, Pilbara’s trailing twelve months revenue has risen to over $296 million. Most importantly, the company has become profitable, having seen its profit jump to $60 million in TTM. This growth has been helped by the surging demand for lithium and strong prices. For example, lithium price jumped by 477% in 2021 and has gained by over 70% year-to-date.
Is Pilbara Minerals a good investment?
There are several reasons why Pilbara Minerals stock is a good buy from a fundamental standpoint. First, it is an Australian company, meaning that it will likely not be affected by the ongoing geopolitical tensions between western and eastern countries. China, its biggest buyer, will likely keep buying its products as it seeks to build leverage in the EV and clean energy industries.
Second, there is an ongoing shortage of lithium, which has helped push lithium prices higher. All signs point to more demand in the coming decades as electric vehicles and energy storage industries surge. For example, while EV companies like Tesla and Nio have done well, the reality is that EV sales account for less than 3% of all sales. Now, as the percentage increases, we will likely see more demand for lithium.
This is notable since Lithium is in short supply around the world. Australia, Chile, and China are the biggest players in the world. Chile has the world’s largest lithium reserves. While this supply will keep rising, Pilbara will continue taking advantage of its leading role in the industry.
Still, it is worth noting that countries are boosting their lithium supplies. For example, Argentina is building 13 new projects while Bolivia is expanding supplies. Most importantly, scientists are coming up with lab alternatives to lithium. As a result, analysts at Goldman Sachs believe that supply will outstrip demand by about 23% by 2025.
Pilbara Minerals share price outlook
The daily chart shows that the Pilbara Minerals stock price has been in a strong bearish trend in the past few months. This process started when the shares made a double-top pattern around the A$3.77 level. In price action analysis, a double-top pattern is usually a bearish sign. Now, the stock has fallen below the chin of this pattern at $2.57. It also remains below the 25-day and 50-day moving averages.
Therefore, by measuring the distance between the double-top and the chin, we can estimate that the share price will continue dropping in the coming months. If this happens, the next target to watch will be at $1.40.