The Allkem Ltd (ASX: AKE) share price was on form on Thursday.
The lithium miner's shares ended the day 3% higher at $12.61.
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Why did this ASX 200 lithium share shoot higher?
Investors were buying Allkem's shares today after brokers responded positively to the company's latest quarterly update.
For example, according to a note out of Goldman Sachs, its analysts have reiterated their buy rating and lifted their price target on the company's shares to $15.50.
Goldman notes that the Olaroz operation performed ahead of expectations, offsetting a softer performance from the Mt Cattlin operation. It commented:
AKE reported record lithium carbonate production at Olaroz of 4.3kt in 2Q, up 29% QoQ and 16%/19% ahead of GSe/consensus, with operational improvements expected to continue into the 2H and third party pricing of US$53,013/t and to remain flat into 3Q. Spodumene production at Mt. Cattlin was below GSe/consensus on ore availability/grade, though mining progression into 2H supports unchanged FY23 production/cost guidance, while realised pricing of US$5,284/t CIF (~US$6,000/t FOB on a SC6 equivalent basis) is expected to improve a further 5% in the Mar-23 quarter.
Over at Bell Potter, its analysts were pleased with the update. In response, the broker retained its buy rating with a slightly trimmed price target of $19.36.
Once again, it was pleased with the performance of the Olaroz operation, which smashed its estimates. It also highlights that Allkem's costs were lower than it was expecting. It said:
December 2022 quarter lithium carbonate production of 4.3kt (BP est. 3.3kt) and sales of 3.1kt (BP est. 3.3kt). Unit costs were US$4,682/t (BP est. US$5,260/t) and average realised third party prices of US$53,013/t or when including internal technical grade sales to Naraha, US$46,706/t (BP est. $46,900/t).
Big returns ahead
Based on where this ASX 200 lithium share is trading right now, the Allkem share price could generate strong returns for investors this year.
Goldman Sachs' price target of $15.50 implies potential upside of 23%. Whereas Bell Potter's price target of $19.36 suggests even greater upside of approximately 54%.
Goldman explained why it is bullish. It concludes:
With optionality across the Americas and Australia on the largest lithium resource in our coverage growing equity LCE production >4x by FY27E, and at a discount to peers at 0.8x NAV (peer average ~1.1x), Allkem is our preferred lithium exposure. We maintain a Buy rating on an increased 12-month PT of A$15.5/sh.
