One of the hottest areas of the Australian share market in 2022 is the lithium sector again.
Thanks to the shift to electric vehicles and renewable energy, demand for lithium is increasing rapidly and supply simply cannot keep up. This has led to lithium prices continuing to rise to record levels.
The good news for investors is that it may not be too late to jump onboard the lithium train. Listed below are two lithium stocks that have been rated as buys and tipped to climb meaningfully higher from current levels. They are as follows:
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Allkem Ltd (ASX: AKE)
The first ASX lithium stock that could be in the buy zone is Allkem. It is the lithium giant that was formed when Galaxy Resources and Orocobre merged last year.
This merger made Allkem a top five player in the industry and brought together a collection of world class operations and projects under one roof.
One leading broker that is bullish on Allkem is Morgans. It recently retained its add rating and lifted its price target to $16.65.
It commented: "We maintain our ADD rating given the strong growth outlook for the company and the potential 24% [now 29%] upside to our valuation. AKE's diverse products and geographical mix adds opportunities to capture value as the market evolves. There is further potential upside that are not in our numbers such as Olaroz stage 3 and/or another lithium hydroxide plant. Should the lithium market continue to remain strong AKE still has a large amount of untapped growth potential."
Liontown Resources Limited (ASX: LTR)
Another lithium stock that is rated highly is Liontown Resources. It is the lithium developer behind the 100%-owned lithium projects at Kathleen Valley and Buldania in Western Australia.
The former is the project that has been getting investors most excited. When it commences production in 2024, Kathleen Valley will be producing ~510,000 tonnes per annum of spodumene. Pleasingly, Liontown has already signed deals with LG Energy Solution and Tesla for over half of this offtake.
Bell Potter is very positive on Liontown. It currently has a speculative buy rating and $3.06 price target on its shares.
The broker commented: "LTR is funded for Kathleen Valley's initial development capital where a definitive feasibility study outlined 658ktpa SC6 production and potential for conversion into 86ktpa lithium hydroxide. LTR is independent and debt free; a strong strategic position in a market for lithium facing supply shortages. Key catalysts are awarding development contracts, final permitting and commencing development. LTR is a mine development company with prospective operations and cash flows. Our Speculative risk rating recognises this higher level of risk and volatility of returns."
