Why did the Pilbara Minerals share price smash the market in September?

The Pilbara Minerals Ltd (ASX: PLS) share price had an eventful month in September.

The lithium miner's shares were down as much as 20% month to date before ultimately ending the period with a 10% monthly gain.

This means that if you had bought Pilbara Minerals' shares at their monthly bottom on 10 September, you would have ended up with a 38% return by the end of the month.

Nevertheless, Pilbara Minerals' actual monthly gain was significantly better than the the S&P/ASX 200 Index (ASX: XJO). The benchmark index rose 2.2% over the period.

Why did the Pilbara Minerals share price outperform September?

Investors were flooding back into beaten down ASX lithium stocks last month amid hopes that battery materials prices have bottomed.

This was driven by reports of a shutdown by one of China's largest lithium mines.

Contemporary Amperex Technology Co Ltd, commonly known as CATL, closed its lithium operations in Jiangxi province, accounting for approximately 6% of global supply.

Given that demand has been softer than supply, investors appear to believe that losing this amount of lithium from the market can only be good news for the outlook of prices.

Combined with short sellers potentially buying back shares to cover positions, this sent ASX lithium stocks hurtling higher.

Insider buying

Also buying the company's shares last month was one of its directors.

A change of director's interest notice reveals that Nicholas Cernotta spent approximately $100,000 on shares early in the month.

The non-executive director picked up 40,938 shares through an on-market trade on 6 September. This boosted his holding to almost 275,000 shares.

Should you invest?

Unfortunately, most brokers believe that the Pilbara Minerals share price is overvalued at current levels despite still being down heavily from its 52-week high.

For example, Citi currently has a neutral rating and $2.90 price target on its shares. This implies potential downside of 11% for investors.

Even Morgans, which has an add rating on its shares, sees minimal upside now for investors. Its price target of $3.30 is just 3 cents above its current share price.

All in all, this could mean that it is worth waiting for the lithium miner's share price to pullback meaningfully for a better entry point. Alternatively, investors could wait to see if lithium prices improve in the medium term. If they do, it could mean that brokers are forced to upgrade their estimates and valuations.

The post Why did the Pilbara Minerals share price smash the market in September? appeared first on The Motley Fool Australia.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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