Buying fundamentally strong ASX shares that have surged in recent weeks or months can be challenging. Here are two ASX shares that brokers think can keep going higher.
1. Calix Ltd (ASX: CXL)
The Calix share price has surged some ~170% in the past 6-months. In particular, this movement is likely driven by the increased investor appetite for green solutions. Calix’s core technology is used to reduce emissions and more environmentally friendly solutions for a broad range of sectors including batteries, crop protection, aquaculture, and also C02 mitigation.
Canaccord Genuity has called out ESG and decarbonisation as “multi-decade structural thematics in their infancy and underpin demand for CXL’s technology across multiple industries”.
On 1 April, the broker rated the company as a buy and increased its target price from $2.50 to $2.60. Furthermore, its report believes that CY21 is shaping up to be a transformational year for the business. Furthermore, pointing to multiple industries as growth drivers.
Water treatment and aquaculture is currently a key revenue segment for Calix. Canaccord points to strong momentum in its US-based water treatment business. In addition to a potential European acquisition to expand revenue and gross margins.
Calix’s C02 mitigation vertical is currently targeting cement and lime industries with a world-first ambition to produce zero-emissions lime. While this segment is not yet revenue-generating, the broker believes the foundations of commercialisation is beginning to form with the progression of its LEILAC-2 project and an agreement with Adbri Ltd (ASX: ABC).
Other verticals such as batteries, sustainable processing, and biotech are in their early days. However, the broker sees strong early results which are supportive of accelerating timelines.
Calix shares are currently fetching $2.26, not far off its all-time record high of $2.47.
2. Lark Distilling Co Ltd (ASX: LRK)
Lark is a Tasmanian-based producer of craft whisky and gin. Its shares are up more than 200% in the past 12-months and 72% higher year-to-date.
What’s interesting about Lark is its 817,549 litres of whisky set for maturing over the next six years. The liquidation value of its maturing whisky is approximately $56.69 million today. Additionally, the estimated net sales value at maturity is approximately $113.6 million. To add some perspective, Lark has a market capitalisation of just $156 million.
Moelis Australia is bullish on spirit consumption trends, the company’s increasing ecommerce penetration, and production volume uplift. It initiated coverage in late March with a buy rating and $2.65 target price. The Lark share price is currently fetching $2.42 and within ~5% of its all-time record highs.