Is Core Lithium a Good Investment in 2024? Share Price Predictions and Insights

Ujjwal Maheshwari Ujjwal Maheshwari, June 2, 2024

Over the past 12 months, Core Lithium Ltd (ASX: CXO stock) has faced a downward spiral, with CXO shares and eventually its market cap plummeting by approximately 80%. For investors, this dramatic decline raises pressing questions about the future of the company and its stock.

 

What’s Behind the Dramatic Share Price Decline?

The primary driver behind Core Lithium’s stock price freefall has been the significant drop in lithium prices. As a key ingredient in battery manufacturing, lithium’s value directly impacts miners’ profitability. Over the past year, the lithium market has been saturated, particularly by increased supply from China, leading to a sharp decline in prices.

Lithium Carbonate, for instance, has seen its price drop from an average of US$32,694 per tonne in 2023 to the current price of US$13,012 per tonne. Similarly, Lithium Hydroxide has fallen from US$32,452 per tonne to US$9,591 per tonne, and Spodumene has decreased from US$3,712 per tonne to US$1,210 per tonne. These plummeting prices have made it uneconomical for Core Lithium to continue its mining operations and other projects, prompting the company to suspend mining activities earlier this year and turn to processing stockpiles instead.

 

A Rocky Road Ahead

Wall street analysts covering Core Lithium and various others like Goldman Sachs’ forecasted financial outlook for CXO shares which paints a grim picture for the near future. The revenue and EBITDA forecasts indicate a challenging period ahead before any significant improvement is expected. For FY 2024, the forecast is revenue of $164 million with an EBITDA of $16 million. However, FY 2025 looks bleaker with expected revenue of $13 million and an EBITDA loss of $7 million. This trend continues into FY 2026, with revenue projected at $34 million and an EBITDA loss of $17 million.

 

Core Lithium Share Price

 

The forecast suggests a potential recovery starting in FY 2027, with revenue projected at $138 million and EBITDA of $7 million, improving further by FY 2028 to $259 million in revenue and a much healthier EBITDA of $74 million. These projections shows the severe impact of the current lithium price environment on Core Lithium’s financial health, indicating a period of financial strain before potential recovery.

 

How favorable are analysts about CXO shares

Investor sentiment towards ASX lithium stocks and basic materials sector at large has been largely negative, driven by falling lithium prices and an oversupply in the market. Core Lithium has seen significant share price declines. Goldman Sachs has issued a sell rating for CXO, with a share price target of 11 cents, citing several concerns.

Firstly, Core Lithium’s valuation is considered high, trading at a premium of about 1.1x its net asset value (NAV), which is higher than its peers. Secondly, the timing of the production restart remains uncertain, with weak lithium prices hampering the company’s ability to fund its BP33 exploration from cash flow. Lastly, while further exploration may expand resources, the development of new discoveries is a long-term prospect.

 

No Quick Rebound

Goldman Sachs does not foresee a significant rebound in lithium price forecast in the near future. The broker expects a continued surplus of lithium, keeping prices under pressure for the next few years. For lithium carbonate, the broker forecasts prices of US$11,106 per tonne in 2024, US$11,000 per tonne in 2025, US$13,323 per tonne in 2026, and US$15,646 per tonne in 2027. Similarly, for lithium hydroxide, the forecasts are US$9,849 per tonne in 2024, US$12,500 per tonne in 2025, US$14,323 per tonne in 2026, and US$16,146 per tonne in 2027. For spodumene, the forecast is US$928 per tonne in 2024, US$800 per tonne in 2025, US$978 per tonne in 2026, and US$1,155 per tonne in 2027.

These projections suggest a challenging environment for lithium miners, with a potential turnaround starting in 2026. The continued surplus and stock price pressure highlight the obstacles that Core Lithium and its peers will need to navigate in the coming years.

 

Strategic Leadership Changes

In response to these challenges, Core Lithium has appointed Paul Brown as the new CEO. Brown, with 25 years of experience in the Australian resources industry, brings a wealth of knowledge and a strategic vision to guide the company through its current difficulties. Brown aims to transform Core Lithium’s operations, focusing on an operational review and exploration opportunities to grow resources. His experience in lithium mining and operations positions him well to lead Core Lithium through these times and prepare for a potential restart of mining activities at the Finniss Lithium Project.

Brown’s appointment is a strategic move by Core Lithium’s board to leverage his extensive experience in the industry. His track record of delivering significant mining operations during his tenure with Fortescue and Mineral Resources is seen as a key asset in steering core lithium ltd towards a more stable future.

 

Core Lithium Share Price Prediction

Based on the analysis of market conditions, financial forecasts, and strategic changes, the outlook for Core Lithium’s share price remains cautious in the short term. The company is likely to face continued pressure due to weak lithium prices and financial challenges. However, a potential recovery in lithium prices and successful strategic execution could improve its prospects in the long term.

In the short term, over the next 12-24 months, continued volatility and potential downside risks are expected due to weak lithium prices and financial strain, which indicates a low forecast. The share price is likely to hover around current levels. In the medium to long term, from 2025 to 2028, a gradual recovery is expected as lithium prices stabilise and potentially rebound, which will push the stock price to a high forecast. Improved financial performance in FY 2027 and FY 2028 could lead to a more optimistic share price outlook, in our view.

Investors should closely monitor lithium market trends and Core Lithium’s operational updates and seek professional advice to make informed investment decisions. While the near-term challenges are significant, a potential recovery in lithium prices and successful strategic execution could position Core Lithium for future growth.

 

What are the best ASX Lithium stocks to invest in right now?

Check our buy/sell tips on the top lithium stock in ASX

 

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