ASX lithium stocks could be attractive buys according to the latest thoughts from experts. There has been a lot of volatility in the ASX share market over the last few months. The lithium miners haven't escaped the disruption.
The market has pushed down the valuation and price/earnings ratios of a lot of businesses. But ASX lithium stocks could be opportunities as demand for lithium batteries and electric vehicles is expected to keep growing over time.
While a business isn't necessarily a buy just because it has fallen, experts believe that these two ASX shares are clear buys.
Pilbara Minerals Ltd (ASX: PLS)
Pilbara describes itself as a listed pure-play lithium company, owning 100% of the world's largest, independent hard-rock lithium operation. Located in Western Australia's resource-rich Pilbara region, the Pilgangoora Project produces a spodumene and tantalite concentrate (lithium).
It also has a goal of growth and diversification, by being involved in the downstream lithium supply chain by supplying both lithium raw materials and being a chemicals supplier.
Ord Minnett is one of the brokers that rates Pilbara Minerals as a buy right now, with a price target of $4.25. That implies a possible rise of over 70% over the next year.
One of the reasons for its optimism in the valuation of the ASX lithium stock is the fact that it's still seeing high lithium prices.
Pilbara recently revealed that a Battery Material Exchange (BMX) pre-auction bid delivered a spot sale of over US$7,000 per dry metric tonne (dmt) for 5,000dmt after adjusting for lithia content and freight costs.
The company expects to hold the next BMX auction in the second week of July 2022. Pilbara Minerals' boss called this an "exceptional outcome" and that demand remains "incredibly strong" with a "continued healthy outlook for the foreseeable future."
Ord Minnett thinks that the Pilbara Minerals share price is valued at under 4 times FY23's estimated earnings.
Allkem Ltd (ASX: AKE)
Allkem describes itself as a "speciality lithium chemicals company and borates producer with a global portfolio of diverse and high-quality lithium chemicals." It's headquartered in Argentina and it has lithium brine and borax operations in Argentina, a hard-rock lithium operation in Australia and a lithium hydroxide conversion facility in Japan.
The ASX lithium stock is liked by the broker Macquarie, with a price target of $17. That implies a potential rise of more than 50%. The broker sees the benefits of the high lithium price but notes that logistics and energy costs will impact profitability in the longer term.
Allkem noted at the start of June that lithium carbonate and spodumene prices were strong. It said the quarter for the three months to June 2022, the average price received for lithium carbonate is expected to be approximately 14% above its prior guidance at US$40,000 per tonne, on sales of approximately 3,500 tonnes.
The company said that customers continue to value the security of supply which is reflected in a fully committed order book for the rest of the 2022 calendar year.
