Core Lithium Ltd (ASX: CXO) shares had another terrible day, finishing trading 3% lower on Monday.
It’s a double whammy as the lithium miner on the same day became the most shorted ASX stock this week. According to the latest ASIC weekly data, a disturbing 11.2% of its shares are currently shorted.
So what’s going on here?
Unflattering future guidance
It seems the market is still reeling from an operational update one week ago.
According to The Motley Fool’s James Mickleboro, Core Lithium’s fourth quarter output was fine but the 2024 and 2025 financial year guidance “shocked investors”.
“Management advised that it expects spodumene production of 80,000 to 90,000 tonnes in FY 2024. This is notably lower than study estimates (and consensus estimates),” said Mickleboro.
“But it gets worse. FY 2025 was expected to see a huge jump in production… However, management has warned that production will be lower than FY 2024’s numbers.”
The share price has thus plunged more than 26% from market close on Friday 21 July.
The news couldn’t have come at a worse time, with the lithium spot price falling about 10% over the same period.
Is it value or a value trap?
As such, institutional investors are fleeing Core Lithium like it’s a burning building.
According to CMC Markets, four out of nine analysts are ringing the alarm bell madly, rating the stock as a strong sell.
Last week the team at Citigroup Inc (NYSE: C) slashed its target price for Core Lithium shares to 50 cents. This compares to a 52-week high of $1.88.
Some analysts, however, are convinced the dip provides value.
The Macquarie Group Ltd (ASX: MQG) team is keeping its outperform rating for Core Lithium, with a target of 90 cents.
