Is the Allkem share price dirt cheap? Broker tips 70% upside for investors

A man in his 30s holds his computer underneath and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.

A man in his 30s holds his computer underneath and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.

The Allkem Ltd (ASX: AKE) share price is back on form this week.

Since the start of the week, the lithium miner’s shares are up 4% to $10.11.

Where next for the Allkem share price?

The good news is that this could be the start of even greater gains for the Allkem share price according to one leading broker.

A note out of Bell Potter reveals that its analysts have responded to the company’s latest quarterly update by retaining their buy rating with a slightly trimmed price target of $17.43.

Based on the current Allkem share price, this will mean potential upside of 72% for investors over the next 12 months.

What did the broker say?

Bell Potter notes that Allkem’s Mt Cattlin operation disappointed during the recent quarter and underwhelmed with its guidance. However, the broker reminds investors that Mt Cattlin is not a major part of the company’s future and therefore investors need not be concerned. It commented:

A defining feature of AKE’s June 2022 quarterly report was weaker production at Mt Cattlin, associated higher unit costs, and a program for the asset’s FY23 performance which involves lower production and higher costs. However, Mt Cattlin is a relatively small and decreasing proportion of AKE’s future value, Olaroz performance was as expected and expansion projects are largely on track.

In light of this and strong lithium prices, the broker sees Allkem as a great option for investors looking at the lithium industry.

We expect AKE’s near term cash generation to lift substantially into 2023 with ongoing strength in lithium commodity prices and production growth. AKE is aiming to maintain 10% share of supply in a global lithium market experiencing unprecedented growth; it has a portfolio of growth projects, balance sheet strength and cash flow from existing projects to achieve this.

The post Is the Allkem share price dirt cheap? Broker tips 70% upside for investors appeared first on The Motley Fool Australia.

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More reading

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.

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