IGO Ltd (ASX: IGO) shares are having another poor session on Tuesday.
In morning trade, the ASX lithium stock is down a further 1% to $7.50.
This stretches its 12-month decline to a disappointing 49%.
Should you buy this ASX lithium stock now?
While it would take a brave investor to jump into the lithium industry right now, Goldman Sachs believes it would be a good move with IGO shares.
Following a review of the industry this week, the broker has reaffirmed its buy rating with a reduced price target of $9.70 (from $10.60).
Based on the current IGO share price, this implies potential upside of almost 30% for this ASX lithium stock over the next 12 months.
In addition, the broker is forecasting a 36 cents per share dividend in FY 2024. If this proves accurate, it will mean an attractive yield of 4.8%.
Though, it is worth noting that Goldman then expects dividends to be constrained to just 4 cents per share in FY 2025 and FY 2026.
What did the broker say?
Goldman laid out three key reasons why it thinks that IGO is an ASX lithium stock to buy right now. It said:
We are Buy rated on: (1) Valuation, trading on ~0.9x NAV and pricing ~US$860/t spodumene (peers ~1x NAV and ~US$1,050/t), where near-term FCF yields FY24E remain attractive vs. peers, (2) Greenbushes is one of the lowest cost lithium assets, (3) TLEA dividends may de-risk nickel spend.
The broker also highlights its belief that concerns over the Greenbushes sales deferrals are unwarranted. It adds:
We continue to see market reaction to Greenbushes sales deferrals as overdone, where without a pricing mechanism reset, we see the rapid decline in spodumene prices driving Greenbushes pricing down to ~US$1,500/t for the Mar-24 quarter (bringing conversion closer to breakeven), and if spot persists potentially below ~US$1,000/t for the Jun-24 quarter, making the risk of ongoing sales curtailments beyond March unlikely in our view, and well ahead of our downside scenario.
