Lithium bonanza! Broker says the Allkem (ASX:AKE) share price could double

Allkem could be a lithium share to buy…

| More on:
A wide-smiling businessman in suit and tie rips open his shirt to reveal a green t-shirt underneath

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Allkem delivered a half year result ahead of expectations this week
  • This impressed the team at Bell Potter
  • Its analysts believe the lithium miner's shares could double over the next 12 months

The Allkem Ltd (ASX: AKE) share price could be great value and destined to climb materially higher.

That's the view of the team at Bell Potter, which has spoken very positively about the lithium miner today.

Why is the Allkem share price great value?

In response to the lithium miner's half year results on Monday, Bell Potter has reiterated its buy rating and lifted its price target to $18.05.

Based on the current Allkem share price of $9.07, this implies potential upside of almost 100% over the next 12 months.

The broker highlights that Allkem's first half earnings were better than it was forecasting. It explained: "AKE reported underlying 1H FY22 EBITDA of US$98m (BP est. US$83m) and NPAT of US$57m (BP est. US$44m)."

Why is the broker so positive?

Bell Potter notes that Allkem is expecting lithium prices to improve further in the second half. This has led to the broker upgrading its earnings forecasts accordingly.

In addition, its analysts like the company due to its production growth potential, which will allow it to benefit greatly from these high lithium prices.

The broker commented: "AKE is a go-to stock for multi-project exposure to lithium markets. AKE will realise significantly higher prices from 2022, driving material operating cash flow growth. Looking ahead, AKE has a portfolio of growth projects to materially lift production over the next three years."

"Naraha will commence conversion of primary grade lithium carbonate into 10ktpa battery grade lithium hydroxide by mid-2022. At Olaroz, an additional 25ktpa LCE capacity will be commissioned from 2H 2022, lifting capacity at this asset to over 40ktpa. Construction of Sal de Vida Stage 1 at around 11ktpa LCE has commenced for first production from 2023. In aggregate, we expect AKE's equity share of production to lift from 33kt LCE in FY21 to over 50ktpa LCE by FY24," it added.

Motley Fool contributor James Mickleboro owns Allkem. 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 Bruce Jackson.

More on Broker Notes

A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Broker Notes

These ASX 200 shares could rise 50% to 60%

Brokers believe these shares could deliver big returns for investors.

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Broker Notes

Morgans says these ASX can rise 30% to 50%

The broker has good things to say about these shares.

Read more »

Two businessmen look out at the city from the top of a tall building.
Broker Notes

2 ASX REITs to buy in July: expert

Is it time to consider ASX REITs?

Read more »

Delighted adult man, working on a company slogan, on his laptop.
Broker Notes

Broker tips 20% upside for these ASX utilities shares

Bell Potter sees upside in these two shares.

Read more »