Lithium hodlers continue to hope based on either (1) EV growth is here to stay or (2) how great their lithium companies are (LTR & PLS) as they are no longer explorers.
But it is nothing to do with how great the companies are, what they do not understand is this:
Both LTR and PLS are still trading at a premium valuation, which is justified when the market expects a lithium price recovery in @2H 2024. Now the market and the last bull broker (Macquarie) have downgraded a recovery prospect, instead inclining to believe an extended period of low lithium pricing due to decelerating EV growth and lithium demand against constant supply & Chile and Africa increasing production nonetheless. This revised market environment expectation means the market is now reducing the valuation of these stocks, paving the way for stock mean reversion process.
It is all about Valuation and Mean Reversion. LTR trades at potential 2025 PE multiple of >70x even at 90c at SC6 pricing of US$1200/MT, while PLS trades at 40x 2025 PE at $3.08 based on SC6 pricing of US$1400/MT.
