Liontown Resources Ltd (ASX: LTR) shares are pushing higher in afternoon trade.
At the time of writing, the lithium developer's shares are up over 2% to $1.35.
Why are Liontown shares rising?
Investors appear to have been buying Liontown shares on Tuesday in response to the release of a broker note out of Morgans.
According to the note, the broker has initiated coverage on the lithium developer with a speculative buy rating and $1.96 price target.
Based on its current share price, this implies potential upside of 45% for investors over the next 12 months.
Though, given its speculative rating, it is a high-risk option and thus only suitable for investors with a higher tolerance for risk.
What did the broker say?
Morgans notes that the company is a near-term developer of Australian spodumene and believes there's significant potential upside for Liontown shares if it can resolve its funding issues and avoid further significant cost blowouts. It commented:
LTR is an early stage developer with spodumene assets in central and southern WA. It is currently constructing the Katherine Valley (KV) project. Planned capacity is 3Mtpa – 4Mtpa (ROM tonnes) with first production expected in mid 2024. The KV project is supported by offtake agreements with several tier one customers.
The company and its flagship project have been impacted by cost increases however and additional funding will be required to complete it. We initiate with a SPECULATIVE BUY rating with potential 12-month upside of 44% to our $1.96 price target. However, we see LTR as a higher risk opportunity than its established peers.
The broker's preferred pick in the industry remains Allkem Ltd (ASX: AKE). It has an add rating and $15.40 price target on the lithium giant's shares. It stated:
We continue to prefer AKE amongst the lithium pure plays as we see a longer growth runway for production and greater potential valuation upside.
