Why these fundies say the Allkem share price is ‘absolutely a buy’

We check the outlook for this ASX lithium stock.

| More on:
A miner in a hardhat makes a sale on his tablet in the field.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Allkem share price has descended around 22% in a month 
  • However, multiple financial analysts rate the company's share price as a buy 
  • Allkem is a global lithium producer that aims to increase production three-fold by 2026 

The Allkem Ltd (ASX: AKE) share price is staging a recovery in early trading on Monday, after plummeting this past month. The bounce comes amid some analysts tipping better days ahead for the global lithium company.

Allkem shares have shed 22% since market close on 27 May and are currently trading at $10.61. That’s 5.15% higher than Friday’s close.

For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) has fallen around 11% over the last month.

So could this lithium explorer’s fortune turn around?

What’s the outlook for the Allkem share price?

Allkem is a lithium producer with projects in Argentina, Western Australia, Japan, and Canada. Lithium is an essential component in electric vehicle (EV) batteries.

Multiple experts are tipping the Allkem share price to rise in the future. Ausbil portfolio manager Luke Smith told Livewire he believes the share is “a buy”.

Smith said he disagrees with the negative view around lithium lately. By way of background, in early June, Goldman Sachs declared the “battery metals bull market as over for now” and predicted a sharp correction in lithium prices.

However, Smith has a different view. He said:

We’ve seen pricing strength, and demand backdrop is extremely strong and strengthening. Allkem, three growth assets, puts it on par with the majors. It’s a buy from us.

Allkem aims to boost lithium production three-fold by 2026. The company also aims for a 10% share of the global lithium market in the next decade.

Tom Richardson from Paradice Investment Management also believes the Allkem share price is a “buy absolutely”. He told Livewire:

I wouldn’t say it’s hot. I would even say that the sector’s been very cold. In fact, it’s the new sector that people love to hate. But it’s absolutely a buy. China is still the biggest buyer in the market, and it looks as though their battery production actually is inflecting up.

Morgans has recently placed a $16.83 price target on Allkem shares with an add rating, as my Foolish colleague James reported. This is a 66.8% upside on the current share price.

Morgans analysts said:

We maintain our add rating given the strong growth outlook for the company. Allkem’s diverse products and geographical mix adds opportunities to capture value as the market evolves.

Share price snapshot

The Allkem share price has exploded 65% in the past 12 months but remains roughly even year to date.

In comparison, the S&P/ASX 200 Materials Index has lost around 9% in the past year and nearly 7% year to date.

Allkem has a market capitalisation of about $6.7 billion based on its current share price.

Motley Fool contributor Monica O'Shea has no position in any of the stocks mentioned. 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.

More on Materials Shares

A woman gives two fist pumps with a big smile as she learns of her windfall, sitting at her desk.
Materials Shares

Why is the Vulcan Energy share price up 8%?

Positive developments in the lithium sector are likely pushing Vulcan shares higher today.

Read more »

asx share price increase represented by golden dollar sign rocketing out from white domes of lithium
Materials Shares

Why is the Core Lithium share price rocketing 5% today?

Is this 'driving' the Core Lithium share price today?

Read more »

Miner holding cash which represents dividends.
Dividend Investing

Do any ASX lithium shares pay dividends?

These three lithium shares offer regular payouts to investors.

Read more »

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Dividend Investing

Why is the Rio Tinto share price sinking today?

Why is this mining giant deep in the red today?

Read more »

Female miner uses mobile phone at mine site
Materials Shares

Why is the Global Lithium share price rocketing 13% on Wednesday?

A record find at the company's Manna Project has got the market in a spin.

Read more »

A young woman with her mouth open and her hands out showing surprise and delight as uranium share prices skyrocket
Broker Notes

Here are 2 ASX lithium stocks analysts rate as buys

These lithium stocks have been rated as buys today...

Read more »

Miner standing in a mine site with his arms crossed.
Materials Shares

This ASX lithium explorer just had a new find, and its share price rocketed 20%

It was a good day on the market for this small cap minerals explorer.

Read more »

A green fully charged battery symbol surrounded by green charge lights representing the surging Vulcan share price today
Materials Shares

Why did the Vulcan Energy share price fire 5% higher today?

Vulcan Energy shares are on the rise again.

Read more »