Pilbara Minerals Ltd (ASX: PLS) shares are a popular option for investors that are looking for exposure to lithium.
But just because the ASX 200 lithium stock is popular, doesn't necessarily mean it is the best way to invest in lithium right now.
For example, the team at Bell Potter currently has a hold rating and $3.60 price target on Pilbara Minerals' shares. This is notably lower than its current share price of $4.17.
But one ASX 200 lithium stock that the broker is bullish on and tipping to rise materially from current levels is Arcadium Lithium (ASX: LTM).
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Why is it an ASX 200 lithium stock to buy?
Bell Potter was pleased with Arcadium Lithium's first quarter update this week, noting that it delivered earnings ahead of its expectations but in line with consensus estimates. It said:
LTM reported Q1 2024 revenue of US$261m (BP est $268m) and Adjusted EBITDA of US$109m (BP est. $68m); overall the result was broadly in line with consensus.
It also notes that the company is forecasting more of the same over the remainder of FY 2024. Though, this will be dependent on realised lithium prices, which were strong during the first quarter. It adds:
The company has held full year 2024 scenarios for revenue (US$1.25-1.9b) and adjusted EBITDA (US$420-1,000m) based on market pricing ranges of US$15,000-25,000/t LCE. LTM achieved a Q1 2024 realised price of $20,500/t for carbonate and hydroxide products, materially higher than published indices due to fixed pricing and floors on a large proportion of hydroxide volumes.
Big returns
In response to the update, the broker has retained its buy rating with a trimmed price target of $9.50.
With the ASX 200 lithium stock currently trading at $7.07, this implies potential upside of 34% for investors over the next 12 months.
To put that into context, a $10,000 investment would be worth almost $13,500 by this time next year if Bell Potter is on the money with its recommendation.
Explaining its bullish view on the lithium miner, the broker concludes:
LTM provides the largest, most diversified exposure to lithium in terms of mode of upstream production, asset locations, downstream processing and customer markets. It is a key large-cap leverage to lithium prices and sentiment, which we expect to improve over the medium term. In supportive markets, LTM's growth pipeline could see the company more than double production over the next three years.
