The lithium industry has been under significant pressure over the past 12 months due to a collapse in battery material prices.
While this has dragged most ASX lithium stocks significantly lower, that doesn't necessarily mean that they are all buys.
Let's now take a look at two popular options and see what analysts are saying about them at current levels. They are as follows:
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Core Lithium Ltd (ASX: CXO)
This lithium miner's shares are down almost 90% over the last 12 months. Investors have been hitting the sell button after weak lithium prices weighed heavily on its operations.
In fact, things have got so bad that the lithium miner is actually more of a processor than anything now. That's because it has suspended mining operations indefinitely and is just processing ore stockpiles until they run out in the middle of the year.
Goldman Sachs thinks investors should stay well clear of the company. That's because it still believes the ASX lithium stock is overvalued despite its significant decline. It said:
We rate CXO a Sell on: (1) Valuation, trading at a premium on ~1.1x NAV and an implied LT spodumene price of ~US$1,200/t (peer average ~1.05x & ~US$1,250/t (lithium pure-plays ~US$1,140/t)), with the lowest average operating FCF/t LCE on a more moderated/deferred production restart/ramp up, (2) Ongoing risk to restart timing in the current pricing environment, with a mine restart highly unlikely ahead of the next wet season and, given the Grants open pit has ~12 months of life, likely tied to a development decision on BP33 (with its own funding risks) to support a new processing contract, increasing the risk of a longer gap in production; (3) Potential resource growth/ development now likely longer dated.
Goldman has a sell rating and 11 cents price target on Core Lithium's shares.
Arcadium Lithium (ASX: LTM)
With its shares down by a third since the start of the year, Bell Potter thinks that Arcadium Lithium is an ASX lithium stock to buy now.
Particularly given its very positive production growth outlook and its diverse operations. The broker explains:
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. In supportive markets, LTM's growth pipeline could see the company more than double production over the next three years.
Bell Potter has a buy rating and $9.50 price target on its shares.
