Top broker says the Allkem share price has peaked

The Allkem Ltd (ASX: AKE) share price is edging higher on Tuesday afternoon.

At the time of writing, the lithium miner’s shares are up almost 0.5% to $14.95.

This means the Allkem share price is now up 33% since the start of the year.

Has the Allkem share price peaked yet?

While the team at Macquarie believe the Allkem share price can keep rising all the way up to $20.00, another leading broker doesn’t agree with this view.

According to a note out of Morgans, its analysts have retained their hold rating and trimmed their price target to $15.00.

This is largely in line with where the company’s shares are trading today.

What did the broker say?

Morgans wasn’t impressed with Allkem’s quarterly update. It commented:

AKE’s 1Q revenue of $298m missed expectations (-17% on VA consensus, -6% on Morgans forecast). The major shift was smaller production at Mt Cattlin. The company has pointed to ongoing pre-stripping activities as it moves to new areas of the mine.

It also highlights that there is a “bigger issue” to be concerned about. That’s the delay and “cost increases expected for Olaroz’s stage 2 expansion” which are expected to add “an additional $45m (12%)” to its budget.

All in all, because of this and its belief that lithium prices could soften, the broker believes the Allkem share price is now fully valued. Morgans concludes:

AKE is a well-diversified lithium producer in terms of products (spodumene, lithium carbonate and soon to be lithium hydroxide) and geographies (Argentina, Australia, Canada). We think it will perform more strongly than peers over the cycle. However, it’s not clear to us whether or not there will be shorter term interruptions to the likely long term uptrend in lithium demand that means there could be a better entry point. Given the stock’s previous sensitivity to the outlook for lithium prices and, in our view, the potential for prices to move away from their recent new found highs, we maintain our HOLD rating.

The post Top broker says the Allkem share price has peaked appeared first on The Motley Fool Australia.

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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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