An investment in Pilbara Minerals Ltd (ASX: PLS) shares has...

An investment in Pilbara Minerals Ltd (ASX: PLS) shares has outstripped returns from the broader market this year.

However, the titan of lithium production is highly susceptible to fluctuations in the price of its electrifying commodity — as are all commodity-related businesses. Following a sensational 36.5% rally year to date, as charted below, the focus now shifts to whether Pilbara Minerals can keep up this pace.

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Pilbara Minerals Price16. Jan30. Jan13. Feb27. Feb13. Mar27. Mar10. Apr24. Apr8. May22. May5. Jun19. Jun2. …Jan '23Feb '23Mar '23Apr '23May '23Jun '23345Zoom1M3M6MYTD1Y5Y10YALLDec 31, 2022→Jun 21, 2023www.********.au

Yesterday’s updated lithium estimates from UBS might provide some insight into the road ahead.

Next stop for the lithium price

Last week, the Platts lithium spodumene price lifted to US$3,500 per metric tonne (mt), jumping 13% from its prior US$3,100mt level. The upwards move prompted analysts at UBS to refresh their own forward estimates for the electric vehicle (EV) material.

Playing catch-up, the broker now anticipates Pilbara Minerals to realise an average price of US$3,360 per tonne for the June-ending quarter. An expected 162,000 tonnes of Pilbara spodumene is also forecast to be sold over this period, equating to roughly US$544 million in quarterly sales.

Although, UBS analysts weren’t completely sold, caveating it all with their belief the average realised price looked “a little high”.

The robust outlook for lithium is underpinned by the belief EV sales in China will remain strong, with UBS stating:

Our China team are confident an acceleration into H2 will keep the 2.8 million year-to-date sales on track for 8.8 million units over 2023. Aggressive pricing strategies (and reduced battery cost pressures) are boosting consumer sentiment despite broader bad news and concerns.

Meanwhile, Goldman Sachs is forecasting a dire shift in the lithium price as early as 2024. Worried about a severe supply glut, Goldman believes spodumene could fall to as low as US$1,800 between 2024 to 2025.

Will it boost Pilbara Minerals’ shares?

According to UBS, Pilbara Minerals could see its earnings per share (EPS) jump 20% year on year if it can command the current Platts average rate throughout FY24. The miner’s EPS for the 12 months ending June 2022 was 19 cents per share.

Levi Spry of UBS has maintained a buy rating on Pilbara Minerals shares. Though, Spry’s price target is set at $4.50 — suggesting a possible 9% downside from the current level. In stark contrast, analysts at Macquarie have a $7.70 price target over the lithium miner.

A substantial pinch of pessimism must be in the air though. On Monday, we reported on the noteworthy amount of short selling across Pilbara Minerals shares. Finding its way into the top 10 most shorted, the company drew in a 7.7% short interest in the latest ASIC report.