After the sell-off, experts think these 2 lithium ASX stocks are great buys

Brokers think that these ASX lithium stocks could charge up returns.

| More on:
a woman stands next to a large green battery smiling and eating an apple with a lifting green arrow line in the background, indicating rising stock prices.

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

  • These two lithium plays are good value according to experts 
  • Pilbara Minerals is one of the opportunities, as it benefits from high lithium prices at a BMX auction 
  • The broker Macquarie thinks that Allkem is a buy, with a price target of $17 

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.

Motley Fool contributor Tristan Harrison 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 Resources Shares

A group of people in suits and hard hats celebrate the rising share price with champagne.
Resources Shares

3 ASX mining shares rocketing higher today on new finds

The three miners have each reported promising new drill results.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Resources Shares

Why is the Rio Tinto share price lagging the ASX 200 on Tuesday?

Investors are pushing Rio Tinto shares down today.

Read more »

a man leans back in his chair with his arms supporting his head as he smiles a satisfied smile while sitting at his desk with his laptop computer open in front of him.
Dividend Investing

Everything you need to know about the latest BHP dividend

BHP announced another sizeable dividend today. Here are the details.

Read more »

A wide-smiling businessman in suit and tie rips open his shirt to reveal a green t-shirt underneath
Resources Shares

‘Self-interested billionaires’: Fortescue share price climbed today despite union war of words

Fortescue’s hydrogen plans received some negative attention today.

Read more »

A woman lies back and relaxes in her boat with a big smile on her face as it floats on the rising tide.
Resources Shares

Why is the Lake Resources share price rebounding 5% on Monday?

Why have Lake Resources shares shot up 5% today?

Read more »

a man in a high visibility vest and hard hat holds a thumbs up at a mine site with heavy equipment in the background.
Resources Shares

3 ASX mining shares soaring between 6% and 20% on new finds

We take a look at what these three ASX mining shares discovered.

Read more »

Three coal miners smiling while underground
Resources Shares

Why India can’t get enough of Aussie coking coal and which ASX shares have exposure

Some ASX coal mining shares could benefit from India’s strong demand for coal.

Read more »

a man in high visibility vest and hard hat at the wheel of heavy mining machinery looks backwards out of the cabin window.
Resources Shares

How did the Fortescue share price respond last earnings season?

Here's what happened to the Fortescue share price when the company dropped its first-half results.

Read more »