Why Arcadium Lithium shares could rise 50% from today

This lithium miner has been the given a big thumbs up by analysts at Bell Potter.

Arcadium Lithium (ASX: LTM) shares have been on a poor run in January.

Since the turn of the year, the lithium miner's shares have lost 28% of their value.

While this is disappointing, one leading broker believes it has created a compelling buying opportunity.

Two happy and excited friends in euphoria holding a smartphone, after winning in a bet.

Image source: Getty Images

Arcadium Lithium shares tipped to rocket

According to a note out of Bell Potter, its analysts have initiated coverage on the lithium miner this morning with a very bullish stance.

In fact, the broker believes that Arcadium Lithium, the result of the merger between Allkem and Livent Corp, could generate mouth-watering returns for investors over the next 12 months.

The note reveals that the broker has started its coverage on the company with a buy rating and $12.10 price target.

Based on the current Arcadium Lithium share price of $8.09, this suggests 50% upside for investors.

What did the broker say?

Bell Potter has been running the rule over Arcadium Lithium's operations and likes what it sees.

For example, it highlights that "the transaction brings increased scale and a tilt to further downstream value."

In addition, it notes that the combination of Allkem and Livent Corp provides significant lithium diversification, a strong balance sheet, and plenty of growth projects. It concludes:

LTM provides the largest, most diversified exposure to lithium in terms of mode of upstream production, asset locations, downstream processing and customer markets. It is a key large-cap leverage to lithium prices and sentiment, which we expect to improve over the medium term. The group has a strong balance [sheet] and growth portfolio.

All in all, the broker appears to believe Arcadium Lithium shares could be a top option for investors that want some exposure to the beaten down lithium industry.

Motley Fool contributor James Mickleboro owns Arcadium Lithium shares. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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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