Pilbara Minerals shares jump on major CEO insider buying

Pilbara Minerals Ltd (ASX: PLS) shares are outperforming on Thursday.

In afternoon trade, the lithium miner's shares are up over 5% to $2.39.

Why are Pilbara Minerals shares racing higher?

The catalyst for today's gain has been news that the lithium miner's CEO has been buying a significant number of shares on-market this week.

According to a change of director's interest notice, Pilbara Minerals CEO, Dale Henderson, picked up 500,000 shares through an on-market trade on Monday.

Henderson paid a total of approximately $1.115 million for the shares. This represents an average of $2.23 per share.

This boosted the CEO's holding in the company by 31% to a total of 2,094,687 Pilbara Minerals shares.

Henderson also holds approximately 1.25 million performance rights.

Why is this good news?

Insider buying is often seen as a bullish signal by investors.

After all, nobody knows how a company is performing better than its insiders.

If they are confident enough to put their hard-earned money on the line, then it is usually interpreted as a sign that they are happy with the company's performance and feel that the market is undervaluing its shares.

So, with Henderson putting $1.1 million into Pilbara Minerals shares this week, investors appear optimistic that things could be looking up for the lithium giant.

Should you invest?

Earlier this week, analysts at Bell Potter turned bullish on the lithium miner. This is on the belief that its shares had been oversold, that a lithium deficit is coming in the near term, and in response to falling short interest. It commented:

We upgrade our PLS recommendation to Buy (from Hold) on recent share price weakness. The short position in PLS has fallen substantially in recent weeks, now 12% compared with ~20% since November 2023. The falling short position was associated with a quarterly rebalance seeing PLS drop out of the MSCI Australia index.

Counter to PLS' weak share price, lithium markets have stabilised and commodity prices marginally improved. We calculate that recent supply curtailments from Australian producers (including PLS) have removed around 50kt of Lithium Carbonate Equivalent from the market (around 4% of 2024 supply). On our supply-demand modelling, the cuts result in a smaller market surplus in 2025 and brings forward our estimate of a market deficit to 2026 (previously 2027).

Bell Potter has put a buy rating and $2.95 price target on its shares. This implies potential upside of 23% for investors over the next 12 months.

The post Pilbara Minerals shares jump on major CEO insider buying appeared first on The Motley Fool Australia.

Fetching Disclosure...

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2024