It has been a difficult year so far for the lithium sector. Concerns that supply may catch up with demand and put downward pressure on prices have been weighing heavily on sentiment.
This has led to many ASX lithium stocks recording sizeable declines in recent weeks and months.
The good news, though, is that this may have created a buying opportunity for investors, according to analysts at Bell Potter.
This morning the broker named four ASX lithium stocks that it rates as buys. They are as follows:
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Allkem Ltd (ASX: AKE)
Bell Potter has a buy rating and $17.53 price target on this lithium producer's shares. This implies potential upside of almost 80% for investors based on the current Allkem share price of $9.76.
The broker is expecting Allkem's cash generation and profits to grow materially in the coming years. It explained:
We expect AKE's near term cash generation to lift substantially into 2023 as strength in lithium commodity indices flows through to lagged realised prices. AKE is aiming to maintain 10% share of supply in a global lithium market experiencing unprecedented growth.
Green Technology Metals Ltd (ASX: GT1)
Its analysts are also bullish on this lesser-known ASX lithium stock. The broker currently has a speculative buy rating and $1.37 price target on its shares. This suggests potential upside of 95% for investors from current levels.
Bell Potter highlights that Green Technology Metals' assets are in close proximity to key North American battery minerals markets. It said:
GT1 is in a strategic position in the fast evolving battery minerals supply chain with an existing lithium resource, a highly prospective tenement position and its strong ESG focus.
Lake Resources N.L. (ASX: LKE)
Another lithium stock Bell Potter is bullish on is Argentina-based Lake Resources. It currently has a speculative buy rating and $2.83 price target on its shares. This implies potential upside of over 90% for investors.
The broker is a fan of the company due to its 50ktpa lithium carbonate Kachi Lithium Brine Project in Argentina. It commented:
This project is expected to employ direct lithium extraction technology which has enormous ESG benefits compared with incumbent brine and hard rock lithium production methods. With this development project, uncommitted product offtake and an independent share register, LKE has significant strategic appeal.
Liontown Resources Limited (ASX: LTR)
Finally, the broker also has speculative buy rating and $3.06 price target on this lithium developer's shares. This suggests that there is potential for 200% upside over the next 12 months.
Bell Potter commented:
LTR is funded for Kathleen Valley's initial development capital where a definitive feasibility study outlined 658ktpa SC6 production and potential for conversion into 86ktpa lithium hydroxide. LTR is independent and debt free; a strong strategic position in a market for lithium facing supply shortages.
