Thoughts towards Allkem Limited (AKE) please

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Question asked 25/11/2023

Thoughts towards Allkem Limited (AKE) please

Dear James and Shawn Enjoy very much you daily reports and detailed analysis of the Australian Stock Market. AKE’s merger has now secured all necessary competition and foreign investment approvals and the merger is targeting completion by Jan 4th. Macquarie has just updated the PT of AKE to $17.00, an over 80% upside. Two insiders have recently purchased shares in the last few days: 1) Peter Coleman acquired 11,492 shares @$8.67 2) Fernando Oris de Roa acquired 16,000 shares @$9.11 These insiders must think that there is further upside for the stock after the merger. Would like to know what do you think of the short to medium term prospect of AKE. Thanks for taking this question.

Answer

Hi Peter,

AKE has dropped over 50% from its 2023 high, following the price of lithium lower which has tumbled by ~75% over the same time. Last year saw analysts significantly underestimate how the supply side of the equation would meet increased demand for the likes of EVs. AKE’s merger maybe all but complete and this brings an operation with more scale, but it’s the price of the commodity that will largely dictate its share price through 2024/5.

We like the risk/reward towards AKE below $8.50 but we would leave some funds to average encase the established downtrend extends lower – as we pointed out earlier in the week Pilbara (PLS) fell by over 40% in 2022, why not in 2023, which implies another ~10% downside.

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Allkem Ltd (AKE)

LAST UPDATED 24/11/2023 13:34

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