Allkem Ltd (ASX: AKE) and IGO Ltd (ASX: IGO) shares have been strong performers on Wednesday.
At the time of writing, both lithium miners are up a sizeable 4%.
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Why are these ASX lithium stocks rising?
There are a couple of catalysts for this rise. One is a strong night on Wall Street for lithium stocks after China announced an interest rate cut in an attempt to boost economic growth. This could bode well for demand for lithium from the massive market.
In addition, both these ASX lithium stocks were the subject of a bullish broker note out of Goldman Sachs this morning.
What is Goldman Sachs saying?
Given its expectation that lithium prices are going to tumble from current levels, Goldman Sachs believes investors should be looking at low-cost producers with production growth potential.
It is for this reason, combined with their attractive valuations compared to peers, that the broker has a preference for Allkem and IGO. It explains:
With our continued expectation that low cost producers with growth optionality & vertical integration will be more defensive and best placed for future opportunities, Allkem and IGO (Buy) remain our preference in the sector at ~1.05x NAV and a discount to peers pricing ~US$1,050-1,100/t LT spodumene (peer average ~$1,400/t). Alternatively PLS/LTR (Neutral) and CXO/MIN (Sell) imply spot pricing persists >1 year.
Goldman has a buy rating and $17.20 price target on Allkem's shares. It notes that "of our covered Australian lithium companies, we believe Allkem has the best LCE growth outlook with production growing >4x to FY28E with further downstream optionality on carbonate production."
Whereas the broker has a buy rating and $16.10 price target on IGO's shares. It notes that IGO also "strong growth vs. our broader mining coverage."
All in all, these ASX lithium stocks could be worth considering if you're looking for exposure to the battery materials industry.
