Down 25% in a month, what is the outlook for the Allkem share price in July?

Could the lithium company’s share price turn around in July?

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Key points

  • The Allkem share price fell 25% in the month of June 
  • However, multiple brokers are tipping more than 60% upside on the company's share price
  • Analysts like Allkem's geographic mix with projects all over the world 

The Allkem Ltd (ASX: AKE) share price had a horror June, but could the company’s fortunes turn around?

The lithium miner’s share price fell from $13.71 at market close on 31 May to $10.31 on 30 June. That’s almost a 25% drop.

In today’s trade, the Allkem share price is 1.48% in the red, currently trading at $9.97.

So could July be a better month for the Allkem share price?

Could the Allkem share price go higher?

Allkem is a lithium company with projects including Mt Cattlin in Western Australia and Olaroz in Argentina. Other projects include Naraha in Japan, Sal de Vida in Argentina, and James Bay in Quebec.

Like multiple ASX lithium shares, the Allkem share price tumbled in the month of June. For context, its peer Core Lithium Ltd (ASX: CXO) lost 31% in June while Lake Resources NL (ASX: LKE) fell 49%.

However, analysts, including Macquarie, are positive on the Allkem share price. Macquarie has placed an outperform rating on the company’s share price with a $17 price target. This is 68% more than the company’s current share price.

The analyst sees high lithium prices benefiting the company’s shares, however, the broker highlights energy costs could impact long-term profit.

Meanwhile, the team at Morgans has also recently placed a $16.38 price target on Allkem shares with an add rating. This represents a 62% upside.

Morgans analysts are positive on the company’s geographical mix and diverse products. Morgans sees these factors as a way for Allkem to “capture value as the market evolves”.

Allkem has a goal of raising lithium production to three times its current levels by 2026. The company also wants to sustain a 10% share of the global lithium market in the next decade.

Quest Long portfolio manager Richard Dixon recently explained why his fund holds Allkem shares. He said:

We have held Allkem for many years and also hold IGO and Mineral Resources.

Allkem is the only lithium pure play of the trio, but it is a diversified producer with major expansion plans that can be easily funded from existing cash flow.

Share price snapshot

Allkem shares have surged nearly 44% in a year but have fallen nearly 5% year to date.

For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) has shed nearly 10% in a year and 7% year to date.

The company has a market capitalisation of about $6.3 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.

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