If you have a high tolerance for risk, then it could be worth thinking about adding the speculative ASX stock in this article to a balanced portfolio.
The stock in question is IperionX Ltd (ASX: IPX).
What is IperionX?
IperionX is aiming to become a leading American titanium metal and critical materials company.
It is using patented metal technologies to produce high-performance titanium alloys from titanium minerals or scrap titanium. This is achieved with lower energy, low costs and low carbon emissions.
The company notes that its Titan critical minerals project is the largest JORC-compliant mineral resource of titanium, rare earth, and zircon minerals sands in the United States.
This leaves it well-positioned to benefit from the demand for titanium metal and critical minerals for advanced U.S. industries. This includes space, aerospace, defence, consumer electronics, hydrogen, electric vehicles, and additive manufacturing.
Why is this a speculative ASX stock to buy?
According to a note out of Bell Potter, its analysts think this ASX stock could be seriously undervalued at current levels.
The note reveals that the broker has reaffirmed its speculative buy rating with an improved price target of $3.85. Based on its current share price of $2.19, this implies a potential upside of 76% for investors over the next 12 months.
To put that into context, a $10,000 investment would be worth approximately $17,600 by this time next year if Bell Potter is on the money with its recommendation.
Though, it is worth acknowledging that its speculative rating means that there's potential for sizeable losses as well. That's why this ASX stock is likely to be only suitable for investors that have a much higher than average risk tolerance.
What is the broker saying?
Bell Potter believes that the company has the potential to disrupt the titanium supply chain with its technology. It explains:
IPX has the potential to disrupt the incumbent titanium supply chain through materially lowering production costs and manufacturing waste. Large-scale production will commence this year, further de-risking the company's technologies and enabling IPX to progress commercial relationships with several high-profile aerospace, automotive, luxury goods and government end users.
Our valuation is mostly supported by Phase 2 earnings using relatively conservative assumptions with respect to process margins. There is potential for IPX to rapidly scale Phase 2 and cement itself as a key supplier in the US and global titanium value chains. Our IPX valuation is now $3.85/sh (previously $3.70/sh), having removed the assumption of a near-term equity raise and its corresponding dilution.
All in all, the broker believes IperionX could have a very bright future ahead of it. This could make it one to watch very closely.
