Which has more upside, Allkem or Pilbara Minerals shares?

Which of these lithium shares has the most upside potential?

| 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

Two of the best performers on the ASX 200 index this year have been Allkem Ltd (ASX: AKE) and Pilbara Minerals Ltd (ASX: PLS) shares.

Since the start of 2022, the Allkem share price has risen 32% and the Pilbara Minerals share price has risen an even stronger 58%.

This compares favourably to the ASX 200 index, which is down 11% over the same period.

Why are Allkem and Pilbara Minerals shares outperforming?

The key driver of these gains has been sky high lithium prices.

Unlike the growing number of lithium explorers on the Australian share market, these two companies are already pulling significant quantities of lithium out of the ground and benefiting from this strong pricing.

In fact, in FY 2022, Allkem reported a profit after tax of US$337.2 million, up from a net loss of US$89.5 million a year earlier.

And over at Pilbara Minerals, it reported a profit after tax of A$561.8 million compared to a loss of A$51.4 million in FY 2021.

The good news for investors is that with lithium prices tipped to remain strong for the foreseeable future and their production continuing to increase, brokers are tipping Allkem and Pilbara Minerals shares to keep on rising.

But which one can rise highest from here?

According to a recent note out of Macquarie, its analysts have an outperform rating and $21.00 price target on Allkem's shares. Based on the current Allkem share price of $14.74, this implies potential upside of 42% for investors over the next 12 months.

As for Pilbara Minerals, the team at Macquarie has an outperform rating and $5.60 price target on its shares. This implies modest upside of 3.3% for investors based on the current Pilbara Minerals share price of $5.42.

Based on what Macquarie is saying, Allkem is the lithium share to buy right now.

Motley Fool contributor James Mickleboro has positions in Allkem Limited. 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 Scott Phillips.

More on Materials Shares

A man looking at his laptop and thinking.
Materials Shares

Are Pilbara Minerals shares a buy, sell, or hold for 2025?

Let's see if analysts think this lithium giant should be in your portfolio now.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Materials Shares

4 popular ASX lithium shares going gangbusters on Tuesday

Pilbara Minerals and three other lithium stocks are having a particularly strong session.

Read more »

Miner looking at a tablet.
Resources Shares

South32 shares sink amid $33 million copper investment

Copper continues to be in hot demand.

Read more »

Three miners looking at a tablet.
Materials Shares

Should you buy BHP shares amid 2024's weakness?

Is now the time to pounce on the mining giant's shares? Here's what analysts are saying.

Read more »

Lion holding and screaming into a yellow loudspeaker on a blue background, symbolising an announcement from Liontown.
Materials Shares

Here's why the Liontown share price could rise almost 70%!

Bell Potter thinks this lithium miner could be a high risk/high reward option for investors.

Read more »

Man with rocket wings which have flames coming out of them.
Materials Shares

Why is the Novonix share price rocketing 16% on Monday?

Big news is giving this stock a huge lift on Monday morning.

Read more »

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Materials Shares

Liontown shares fall on major guidance and cost update

Big changes are being made at this lithium miner due to weak prices.

Read more »

Miner standing in front of trucks and smiling, symbolising a rising share price.
Materials Shares

Core Lithium share price storming higher on 'excellent' exploration results

ASX investors are sending Core Lithium shares flying higher today.

Read more »