ASX Today — Live ASX News | XJO Down; Webjet, Plenti, Universal Store Feature

Let’s take our minds off all the US debt ceiling drama for a moment and focus on a promising area in the market: lithium.

Looks like the lithium recovery is well underway, with lithium prices up close to 40% in the last month.

Furthermore, high lithium prices have brought plenty of cash to lithium producers. In a presentation last week, Pilbara Minerals [ASX:PLS] showed just how much.

Just over a year ago, Pilbara had around $200 million in cash balance. That’s grown to $2.7 billion, and that’s after paying a $330 million dividend…

What’s more, Pilbara expects the good times to keep on rolling.

As they mentioned, they see a ‘really significant lithium deficit appearing’ in the long run, one that would need the size of between 13 and 21 Pilgangoora projects to fill it:

Source: Pilbara Minerals

By now, it’s no secret that to reach net zero targets, we are going to need a staggering amount of critical minerals.

To explain, the International Energy Agency (IEA) estimates that mineral demand from electric vehicles (EV) and battery storage will grow 10 times in a more conservative scenario. Furthermore, it would grow over 30 times in a scenario where the world keeps global warming well below two degrees.

It’s a daunting job ahead for miners….and a great opportunity for investors.

One other thing Pilbara Minerals mentioned in their presentation is they are very focused on adding value along the battery minerals supply chain.

The way they are planning to do this is through their joint venture with the South Korean company, POSCO. The POSCO Pilbara Lithium Solution is expected to produce 43,000 tonnes per year of lithium hydroxide and generate the company some downstream revenue.

In fact, there’s been a lot of talk from miners about moving down the supply chains and into value-added processes.

Source: RMI

https://commodities.fattail.com.au/investing-in-miners-with-value-add-potential/2023/05/24/

I mentioned Universal Store (ASX:UNI) latest guidance for FY23.

Well, about that.

According to fresh research first reported by Bloomberg, company earnings guidance is wrong about 70% of the time.

That’s quite a feat considering these estimates are ranges, making the misses all the more glaring.

The latest study found that companies offer accurate guidance only about 30% of the time.

This cascades to consensus analyst estimates, which are influenced by firms’ guidance. As Bloomberg then explained:

‘Their inaccurate forecasts, in turn, influence the earnings estimates given by Wall Street stock analysts. That helps explain why only a very low percentage of companies deliver results within analysts’ estimates, according to data compiled by Bloomberg for the S&P 500 over the past 60 quarters. In the first fiscal quarter of 2023, companies in the bellwether index reported earnings in line with estimates just over 3% of the time.’

That last line bears repeating:

In the first fiscal quarter of 2023, companies in the bellwether index reported earnings in line with estimates just over 3% of the time.

Bloomberg: 'Companies offer accurate guidance about 30% of the time. Their inaccurate forecasts, in turn, influence the earnings estimates given by Wall Street stock analysts.' https://t.co/Yd6eXpuZb3

— Fat Tail Daily (@FatTailDaily) May 24, 2023

Youth fashion retailer Universal Store (ASX:UNI) is down nearly 30% and hit a 52-week low on Wednesday after releasing a FY23 trading update.

Interestingly, the numbers shared by Universal seem positive.

The retailer said it expects to deliver ‘record sales in FY23 and material growth in EBIT compared to FY22’.

However, UNI did say the macro environment is ‘deteriorating’, with ‘increasingly clear signs that the youth customer is seeing pressures on their discretionary spending levels.’

The savage market response highlights the adage that markets are always looking ahead … and they’re not liking UNI’s prospects for FY24.

The retailer said trading conditions over April and May ‘further tightened, indicating that some customers are reducing their spending’.

Universal expects this ‘subdued environment’ to continue into FY24.

UNI guided for FY23 underlying EBIT to be in the range of $39 million to $41 million, which is below consensus estimates of ~$46 million.

$UNI is down ~30% and hit a 52-w low on Wed, despite $UNI.AX expecting 'record sales in FY23 and material growth in EBIT compared to FY22'.

However, $UNI is seeing 'increasingly clear signs that the youth customer is seeing pressures on their discretionary spending levels.' pic.twitter.com/xl1STnXqnm

— Fat Tail Daily (@FatTailDaily) May 24, 2023