Top broker says the Allkem share price has peaked

This lithium share could have peaked according to analysts at Morgans…

| More on:

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

The Allkem Ltd (ASX: AKE) share price is edging higher on Tuesday afternoon.

At the time of writing, the lithium miner's shares are up almost 0.5% to $14.95.

This means the Allkem share price is now up 33% since the start of the year.

Has the Allkem share price peaked yet?

While the team at Macquarie believe the Allkem share price can keep rising all the way up to $20.00, another leading broker doesn't agree with this view.

According to a note out of Morgans, its analysts have retained their hold rating and trimmed their price target to $15.00.

This is largely in line with where the company's shares are trading today.

What did the broker say?

Morgans wasn't impressed with Allkem's quarterly update. It commented:

AKE's 1Q revenue of $298m missed expectations (-17% on VA consensus, -6% on Morgans forecast). The major shift was smaller production at Mt Cattlin. The company has pointed to ongoing pre-stripping activities as it moves to new areas of the mine.

It also highlights that there is a "bigger issue" to be concerned about. That's the delay and "cost increases expected for Olaroz's stage 2 expansion" which are expected to add "an additional $45m (12%)" to its budget.

All in all, because of this and its belief that lithium prices could soften, the broker believes the Allkem share price is now fully valued. Morgans concludes:

AKE is a well-diversified lithium producer in terms of products (spodumene, lithium carbonate and soon to be lithium hydroxide) and geographies (Argentina, Australia, Canada). We think it will perform more strongly than peers over the cycle. However, it's not clear to us whether or not there will be shorter term interruptions to the likely long term uptrend in lithium demand that means there could be a better entry point. Given the stock's previous sensitivity to the outlook for lithium prices and, in our view, the potential for prices to move away from their recent new found highs, we maintain our HOLD rating.

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 Broker Notes

Senior man wearing glasses and a leather jacket works on his laptop in a cafe.
Broker Notes

Should I still swap my CSL for CBA shares or has the market corrected?

The two stocks have travelled opposite directions this month.

Read more »

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

Why Macquarie expects this ASX All Ords copper stock could surge 38%

With costs coming in below expectations, this ASX All Ords copper stock could rocket higher over the coming months.

Read more »

woman holding 'hiring' sign in shop
Broker Notes

Can you guess whether Macquarie prefers REA Group, CAR Group or SEEK shares?

Which ASX online classifieds business offers the best investment opportunity today?

Read more »

Female miner smiling in front of a mining vehicle as the Pilbara Minerals share price rises
Broker Notes

Expert says this ASX All Ords small cap mining stock could rocket 38%

Big upside ahead?

Read more »

Two laughing young women hold shopping bags and ride an escalator up to another level in a Scentre Group shopping centre.
Broker Notes

3 ASX consumer sector shares to buy in July: expert

A leading expert has named its top 3 picks.

Read more »

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

Broker says WiseTech shares can hit $135

Bell Potter has good things to say about this rebounding tech stock.

Read more »

a man holds a firework sparkler in both hands as a shower of sparkly confetti falls from the sky around him as he smiles and closes his eyes in a celebratory scene.
Broker Notes

Stock market outlook: Macquarie 'ready to party like its 1999'

It may not be too late to invest in the share market according to the broker.

Read more »

A woman wearing dark clothing and sporting a few tattoos and piercings holds a phone and a takeaway coffee cup as she strolls under the Sydney Harbour Bridge which looms in the background.
Broker Notes

The smartest Australian stocks to buy with $400 right now

Let's see why these shares are highly rated by brokers.

Read more »