Two of the best performers on the ASX 200 index this year have been Allkem Ltd (ASX: AKE) and Pilbara Minerals Ltd (ASX: PLS) shares.
Since the start of 2022, the Allkem share price has risen 32% and the Pilbara Minerals share price has risen an even stronger 58%.
This compares favourably to the ASX 200 index, which is down 11% over the same period.
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Why are Allkem and Pilbara Minerals shares outperforming?
The key driver of these gains has been sky high lithium prices.
Unlike the growing number of lithium explorers on the Australian share market, these two companies are already pulling significant quantities of lithium out of the ground and benefiting from this strong pricing.
In fact, in FY 2022, Allkem reported a profit after tax of US$337.2 million, up from a net loss of US$89.5 million a year earlier.
And over at Pilbara Minerals, it reported a profit after tax of A$561.8 million compared to a loss of A$51.4 million in FY 2021.
The good news for investors is that with lithium prices tipped to remain strong for the foreseeable future and their production continuing to increase, brokers are tipping Allkem and Pilbara Minerals shares to keep on rising.
But which one can rise highest from here?
According to a recent note out of Macquarie, its analysts have an outperform rating and $21.00 price target on Allkem's shares. Based on the current Allkem share price of $14.74, this implies potential upside of 42% for investors over the next 12 months.
As for Pilbara Minerals, the team at Macquarie has an outperform rating and $5.60 price target on its shares. This implies modest upside of 3.3% for investors based on the current Pilbara Minerals share price of $5.42.
Based on what Macquarie is saying, Allkem is the lithium share to buy right now.
