An insider just loaded up on Allkem shares: Should you buy into this lithium giant?

Three people in a corporate office pour over a tablet, ready to invest.

Three people in a corporate office pour over a tablet, ready to invest.Allkem Ltd (ASX: AKE) shares are falling on Thursday.

In morning trade, the lithium miner’s shares are down 3% to $11.55.

That’s despite some potential positive news out of the miner.

Insider buys Allkem shares

With Allkem shares down by almost a third from their 52-week high of $16.75 amid concerns that lithium prices could soon tumble, one of the company’s directors appears to believe this has created a buying opportunity.

According to a change of director’s interest notice, Allkem’s non-executive chairman, Peter Coleman, has more than doubled his holding through a series of on-market purchases.

The notice reveals that Coleman picked up 17,054 shares across 24, 27, and 28 February at an average price of $11.6115 per share. This equates to a total consideration of just a touch under $200,000 and increases the chairman’s holding to 33,025 Allkem shares.

Is this a smart move?

The team at Goldman Sachs is likely to approve of this purchase.

At the end of last week, the broker responded to Allkem’s half-year results by retaining its buy rating with a slightly trimmed price target of $15.40. This implies potential upside of 33% for investors over the next 12 months.

It also means that those 17,054 shares that Coleman picked up in recent days would be worth approximately $262,000 if Allkem’s shares rose to that level. That’s over $60,000 more than the chairman’s investment.

Why Allkem?

Goldman explained that it is positive on Allkem even if lithium prices tumble for the following reason:

Allkem has one of the best production outlooks in our lithium coverage, with broad-based growth optionality, second only to Mineral Resources on an LCE basis when including downstream hydroxide production on an equity basis. This drives our forecast for the company’s equity LCE production growth of >4x by FY27E, supporting earnings rebounding to near current record levels despite the declining lithium price environment.

The post An insider just loaded up on Allkem shares: Should you buy into this lithium giant? appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor James Mickleboro has positions in Allkem. 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.

from The Motley Fool Australia

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