Why these brokers see huge upside for the Allkem share price

Is this a lithium share to buy right now?

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The Allkem Ltd (ASX: AKE) share price is rising with the market on Friday.

At the time of writing, the lithium miner's shares are up 2% to $12.90.

This means they are now up 15% since the start of the year.

Can the Allkem share price keep rising?

A couple of leading brokers believe that the company's shares can keep rising despite the proposed merger with Livent Corp (NYSE: LTHM).

For example, the team at Bell Potter currently has a buy rating and a $19 price target on its shares. This implies a potential upside of 47% for investors over the next 12 months from current levels. It commented:

In our view, the AKE-Livent Corporation merger will likely proceed and the merged entity will have an asset portfolio to support ongoing production and earnings growth into what we expect to be an exceptionally strong market for lithium. We expect the forthcoming Scheme Booklet to provide further clarity on the company's growth outlook when it is released in the coming months.

Another bullish broker is Goldman Sachs. Despite its belief that lithium prices are going to crumble in the near term, its analysts still see the Allkem share price as great value.

Goldman has a buy rating and a $17.20 price target on its shares. This suggests a potential upside of 33% from current levels. It commented:

With optionality across the Americas and Australia on the largest lithium resource in our coverage growing equity LCE production ~4x by FY28E, and at a discount to peers at ~1.0x NAV (peer average ~1.3x) and pricing ~US$990/t LT spodumene (peers ~US$1,200/t), Allkem remains our preferred lithium exposure. We maintain a Buy rating; 12m PT of A$17.2/sh. We reiterate that while there may be limited visibility ahead of the federal election (Oct-23), as resources are owned/ permitted by the provinces (per the constitution), there is more limited risk of federal policy changes to lithium producers, in our view.

Motley Fool contributor James Mickleboro has positions in Allkem. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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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