The ASX lithium share sector could be a fruitful place to look for opportunities that could deliver good returns, according to the experts at Macquarie.
There has been plenty of volatility in the sector over the last couple of years, which can certainly open up opportunities to buy.
With the long-term growth potential of electric vehicles, it could be a sector holding significant opportunity.
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Why Macquarie is excited about ASX lithium shares
According to reporting by The Australian, Macquarie believes the reduction in share prices within the lithium sector is appealing.
Since 10 August, the Pilbara Minerals Ltd (ASX: PLS) share price is down more than 20%.
From 19 July 2023, the Piedmont Lithium Inc (ASX: PLL) share price has declined more than 30% and the Allkem Ltd (ASX: AKE) share price has dropped around 30%.
Since 24 January 2023, the Mineral Resources Ltd (ASX: MIN) share price has also fallen almost 30%.
The Macquarie experts suggest the current prices of ASX lithium shares have an implied (lithium) spodumene price at approximately the broker's long-term price assumption of US$1,500 per tonne.
Macquarie said:
We believe this is a buying opportunity for investors, especially the ones who look past short-term volatilities, to increase their exposure to a critical mineral at an attractive price level.
How undervalued are these opportunities?
According to The Australian, Macquarie believes Piedmont Lithium has potential upside of 200%, while Allkem, Mineral Resources, and Pilbara Minerals could have upside of between 100% to 160%. As well, IGO Ltd (ASX: IGO) could have an upside of 60%. That's based on current spodumene and lithium hydroxide prices.
Macquarie suggests there's an opportunity for strategic investors that could unlock value through business consolidation or offtake agreements.
The experts from Macquarie said that Pilbara Minerals is their preferred producer.
Pilbara Minerals share price snapshot
Despite the recent decline, the Pilbara Minerals share price is still up 15% in 2023 to date.
