If you're looking to take advantage of recent weakness in the lithium industry, then Allkem Ltd (ASX: AKE) shares could be worth considering.
That's the view of analysts at Morgans, which earlier this week reiterated their bullish view on this lithium stock.
According to the note, the broker has retained its add rating with a slightly trimmed price target of $16.38.
Based on the latest Allkem share price, this implies potential upside of over 40% for investors over the next 12 months.
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Why is Morgans bullish on the Allkem share price?
Morgans is feeling very positive about the Allkem share price due to sky high lithium prices, its production mix, and its bold production growth plans.
The broker explained:
We maintain our ADD rating given the strong growth outlook for the company.
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.
What about concerns over weaker lithium prices in the coming years?
Something that has been weighing on lithium shares in recent weeks are concerns over the potential for lithium prices to tumble in the coming years as supply increases.
Morgans has considered this and acknowledges that prices will inevitably retreat from current levels in the future. However, it doesn't necessarily think that decline is imminent.
We don't think spot prices are likely to remain at current levels forever but we think there is still plenty of scope for contract prices to increase further before settling down into a long term average.
Overall, the broker appears to see the current Allkem share price as a great entry point for investors looking for lithium exposure.
