BMO Capital Markets has adjusted its stance on Piedmont Lithium (NASDAQ: PLL), reducing the price target to $15.00 from the previous $28.00 while retaining a Market Perform rating on the stock.
The revision, which came on Thursday, follows Piedmont Lithium's announcement that approximately 14 kilotonnes (kt) of shipments expected from North American Lithium (NAL) in the second quarter were postponed to the beginning of the third quarter due to port logistical issues.
Despite the shipment delay, the company's full-year guidance remains unchanged at 126kt. However, the delay is anticipated to result in a weaker second quarter as the shipments are now expected in the latter half of the year.
On a positive note, NAL's operational performance has shown significant improvement, with a record quarterly production of about 49.7kt, which is an increase of 23% compared to the previous quarter. Additionally, the process plant utilization has risen to 83%, marking a 10% increase quarter over quarter.
"PLL reported that ~14kt of shipments expected from NAL in Q2 were delayed to early Q3 due to port logistical issues. While full-year guidance of 126kt remains intact, we expect Q2 will be weaker given these timing differences with more tonnes shifted to H2," said the analyst.
"Positively, NAL operating performance continues to improve with record quarterly production of ~49.7kt (+23% q/q) and process plant utilization at 83% (+10% q/q). We are adjusting our target price methodology to a blend of long-term NAV and near-term adj. EBITDA, which lowers our target price," the analyst added.
Meanwhile, Piedmont Lithium has shown robust first-quarter performance, with BMO Capital Markets subsequently raising the company's stock target based on the positive results and updated shipment guidance for 2024.
The company reported a Q1/24 adjusted earnings per share (EPS) of ($0.61) and revenue of $13.4 million, ending the quarter with $71 million in cash reserves.
InvestingPro Insights
In light of the recent adjustments by BMO Capital Markets, a closer look at Piedmont Lithium's financial health through InvestingPro data provides additional context for investors. Piedmont Lithium's market capitalization stands at $202.86 million, reflecting the market's current valuation of the company. Despite operational improvements and a robust production report, the company's P/E ratio remains negative at -5.51, indicating that it is not generating net earnings at present. This is further corroborated by an adjusted P/E ratio for the last twelve months as of Q1 2024, which is also negative at -5.43.
The company's revenue for the same period was $53.22 million with a gross profit of $6.37 million, leading to a gross profit margin of approximately 11.97%. This indicates that while the company is making sales, the margin on these sales is relatively modest. Additionally, the operating income margin stands at a significant negative value of -70.7%, reflecting the challenges the company faces in achieving profitability amidst its growth and scaling efforts.
Investors looking for growth indicators might note the PEG ratio of 0.03, suggesting that if the company's earnings turn positive, there could be potential for growth compared to its earnings. Moreover, the fair value estimates from analysts and InvestingPro stand at $40 and $14.49 respectively, suggesting there may be room for the stock price to grow if the company can capitalize on its operational improvements and overcome logistical challenges.
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