A hellacious start to the year for lithium prices has failed to shake Macquarie's conviction in a number of ASX lithium shares.
In the past month alone, the lithium carbonate price has experienced a swift 21% retreat — signifying an equalising in supply and demand. However, the team at Macquarie has published views today that paint a rosy picture ahead for a few companies in the industry.
Lithium forecasts divided
The investment bank is generally bullish on the lithium sector as a whole. Last month, the broker was across 13 companies in the lithium space, with only one failing to be awarded an outperform rating.
In January, Macquarie shared a note that explained what underpins the team's positive outlook. The crux of it was an expectation for a prolonged shortfall in lithium supply due to development delays and additional capital being required.
In contrast, Matty Zhao of Bank of America recently provided a lithium critique during an interview on CNBC. During the interview, Zhao discussed the potential for electric vehicle (EV) sales to slow this year, putting pressure on lithium.
This year, globally, we are expecting EV growth of 41%. For China, specifically, we expect growth to slow down to 22% from 95% last year. With that, lithium demand we are expecting 20% [growth] globally, mainly driven by the EV demand growth.
At the same time, we are also seeing a lot of supply coming out from lithium mines — we are expecting 38% lithium supply growth this year. That's why 2023 is likely to turn into a surplus year for lithium.
Big expectations for these ASX lithium shares
Despite other analysts highlighting the potential for lithium surplus, it appears Macquarie's perspective remains relatively unchanged.
Today, the broker initiated coverage on Piedmont Lithium Inc (ASX: PLL), Sayona Mining Ltd (ASX: SYA), and Leo Lithium Ltd (ASX: LLL) — all with outperform ratings. These three ASX lithium shares have outpaced the S&P/ASX 200 Index (ASX: XJO) so far this year, as shown above.
Furthermore, the broker's price targets for each are as follows:
- Piedmont Lithium: $2.10 price target, 140% above the current share price
- Sayona Mining: No price target provided, currently trades at 24.8 cents a share
- Leo Lithium: $1.35 price target, 149% above the current share price
Coincidentally, Piedmont shares have entered a trading halt today after being hit with a short-seller report. Activist investment firm Blue Orca Capital has labelled the future profit plans of this ASX lithium share as "fantasy".
