Why these fundies say the Allkem share price is ‘absolutely a buy’

The Allkem Ltd (ASX: AKE) share price is staging a recovery in early trading on Monday, after plummeting this past month. The bounce comes amid some analysts tipping better days ahead for the global lithium company.

Allkem shares have shed 22% since market close on 27 May and are currently trading at $10.61. That’s 5.15% higher than Friday’s close.

For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) has fallen around 11% over the last month.

So could this lithium explorer’s fortune turn around?

What’s the outlook for the Allkem share price?

Allkem is a lithium producer with projects in Argentina, Western Australia, Japan, and Canada. Lithium is an essential component in electric vehicle (EV) batteries.

Multiple experts are tipping the Allkem share price to rise in the future. Ausbil portfolio manager Luke Smith told Livewire he believes the share is “a buy”.

Smith said he disagrees with the negative view around lithium lately. By way of background, in early June, Goldman Sachs declared the “battery metals bull market as over for now” and predicted a sharp correction in lithium prices.

However, Smith has a different view. He said:

We’ve seen pricing strength, and demand backdrop is extremely strong and strengthening. Allkem, three growth assets, puts it on par with the majors. It’s a buy from us.

Allkem aims to boost lithium production three-fold by 2026. The company also aims for a 10% share of the global lithium market in the next decade.

Tom Richardson from Paradice Investment Management also believes the Allkem share price is a “buy absolutely”. He told Livewire:

I wouldn’t say it’s hot. I would even say that the sector’s been very cold. In fact, it’s the new sector that people love to hate. But it’s absolutely a buy. China is still the biggest buyer in the market, and it looks as though their battery production actually is inflecting up.

Morgans has recently placed a $16.83 price target on Allkem shares with an add rating, as my Foolish colleague James reported. This is a 66.8% upside on the current share price.

Morgans analysts said:

We maintain our add rating given the strong growth outlook for the company. Allkem’s diverse products and geographical mix adds opportunities to capture value as the market evolves.

Share price snapshot

The Allkem share price has exploded 65% in the past 12 months but remains roughly even year to date.

In comparison, the S&P/ASX 200 Materials Index has lost around 9% in the past year and nearly 7% year to date.

Allkem has a market capitalisation of about $6.7 billion based on its current share price.

The post Why these fundies say the Allkem share price is ‘absolutely a buy’ appeared first on The Motley Fool Australia.

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More reading

• 3 ASX lithium stocks this fund manager is holding despite sector pullback
• Guess which ASX 200 mining shares these experts are backing
• Here’s why analysts rate these ASX 200 mining shares as buys
• Could ASX lithium shares be set for a boost?
• Why has the Allkem share price tumbled 30% from its May all-time high?

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. 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.

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