The lithium industry has been a difficult place to invest recently.
While the declines have been disappointing, one leading broker appears to believe it could have created a compelling buying opportunity for investors with a high tolerance for risk.
For example, Bell Potter thinks that the two ASX lithium stocks listed below could rise massively from where they currently trade.
Here's what the broker is saying:
Delta Lithium Ltd (ASX: DLI)
According to a note, Bell Potter has retained its speculative buy rating on this lithium explorer's shares with a trimmed price target of 85 cents. This implies a potential upside of almost 87% for investors over the next 12 months.
The broker believes that this ASX lithium stock could rally strongly next year thanks to a number of catalysts. It explains:
We reduce our valuation by 37%, primarily due to the recent capital raise, and the inclusion of a BP assumed 4QCY24 capital raising to fund the development of a Mt Ida concentrate project, assuming positive FID in 4QCY24. DLIs' share priced declined materially in 2HCY23 as on-market strategic investment ended, and lithium prices declined. We see upside in DLIs' share price through CY24 with i) expected positive re-valuation catalysts from Yinnetharra exploration, ii) our forecast improvements in lithium prices, and, iii) the possibility of further strategic investment / M&A activity.
Lake Resources N.L. (ASX: LKE)
Another ASX lithium stock that Bell Potter believes has huge upside potential is Lake Resources. It has a speculative buy rating and 25 cents price target on its shares. This suggests a potential upside of 97% for investors.
Although the broker highlights the market's likely (and arguably justified) scepticism over the company's lithium price assumptions in its definitive feasibility study, it remains positive. It said:
The DFS results are relatively consistent with previous market guidance. A US$33,000/t LCE average price will be viewed by the market as aggressive, though is supported by market research (Wood Mackenzie).
It then adds:
Key to LKE's success over 2024 will be maintaining tension with respect to financing and offtake, potentially amid a weak lithium market. In parallel, FEED and permitting will continue. LKE is relatively well funded with 30 September 2023 cash of A$60m. The Kachi project's large scale and DLE technology selection does potentially make LKE a strategically important company over the medium to long term; DLE brings ESG benefits including less land disturbance and water consumption.
