Recent weakness in the Allkem Ltd (ASX: AKE) share price could have created an extremely attractive buying opportunity for investors.
Thatâs the view of analysts at Bell Potter, which are predicting material gains ahead for the lithium minerâs shares.
What is the broker saying about Allkem shares?
According to the note, Bell Potter currently has a buy rating and $18.61 price target on the companyâs shares.
This implies potential upside of approximately 84% for Allkem shares over the next 12 months from current levels.
And while Bell Potter isnât expecting a dividend to be paid this year, it wonât be long until its maiden dividend makes an appearance.
Its analysts expect a 40 cents per share dividend in FY 2024, which represents an attractive 3.9% yield.
Why is it bullish?
Bell Potter is bullish on Allkem shares due to its strong production growth plans, balance sheet strength, and the diverse nature of its operations geographically, operationally, and end-product. It commented:
We expect AKEâs cash generation to lift substantially from 2023 with ongoing strength in lithium demand, 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 target. AKEâs portfolio is also diversified across lithium commodity type, mode of production, asset location and end-user country.
Bell Potter also spoke about lithium prices, noting that Allkem expects another strong quarter ahead despite recent spot price weakness. It said:
AKE expect March 2023 quarter pricing to be consistent with the December 2022 quarter (US$53,000/t), and this was reiterated in the result today. The company also noted that stocks within the lithium supply chain remain low and should be supportive of prices, despite recent weakness in spot indices.
All in all, the broker appears to believe Allkem shares could offer a compelling risk/reward at current levels.
The post Bell Potter says buy Allkem shares now for 80% upside appeared first on The Motley Fool Australia.
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More reading
- Analysts say 2 of these ASX lithium shares can double in value
- Buy these ASX 200 shares for 50%+ returns: Goldman Sachs
- Investing in ASX 200 lithium shares? You’ll want to read this
- Why are ASX lithium shares sinking today?
- What was with ASX lithium shares today?
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.
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