Nobody knows when the lithium rout will end. But one thing that we do know is that there is likely to be some bargain buys when it does.
But which ASX lithium shares could be good options when the tide finally turns? Two that brokers rates as buys are listed below. Here's what they are saying about them:
IGO Ltd (ASX: IGO)
The first ASX lithium share that could be a buy is IGO.
That's the view of analysts at Goldman Sachs, which believes its low costs and free cash flow (FCF) generation make it a great option in the current environment. It commented:
We rate IGO a Buy, where on valuation IGO is trading on <0.9x NAV (<1x excl. Ni) and pricing ~US$1,010/t spodumene, at a discount to peers (~1.05x NAV and ~US$1,200/t), with near-term FCF yields remaining >5% and attractive vs. peers (<0% on average) and supporting ahead of peer capital returns.
Goldman has a buy rating and $8.85 price target on IGO's shares. This implies 28% upside for investors over the next 12 months.
Liontown Resources Ltd (ASX: LTR)
Another ASX lithium share that could offer big returns is lithium developer Liontown Resources.
Its shares have been hammered since its takeover collapsed late last year. While this is disappointing, Bell Potter sees it as a buying opportunity for investors with a high risk tolerance.
It believes the company's Kathleen Valley lithium project is a valuable asset. The broker explains:
LTR owns the Kathleen Valley (KV) lithium project in Western Australia. KV is in development and set to commence production in mid-2024, supplying into Ford, Tesla and LG Energy Solution offtake agreements. The company is funded to complete KV and has a strong cash buffer over and above remaining development and working capital requirements. We expect lithium market sentiment to improve into 2024 as EV supply chain inventories normalise. KV is highly strategic in terms of being large scale and located in a stable mining jurisdiction.
Bell Potter has a speculative buy rating and $1.60 price target on its shares. This suggests potential upside of almost 80% for investors.