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Allkem thoughts on risk/reward below $9.50

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Allkem thoughts on risk/reward below $9.50

Hi Team, I know recently you mentioned Allkem was likely to test $10 and you liked it in the $9.50 to $10 range. Now that it has dropped below that price and pretty quickly, what are your thoughts on the risk/reward for Allkem and other lithium producers like Pilbara at the moment? Thanks, Dean


Hi Dean,

We believe the lithium stocks are in an “accumulation zone” but it is a volatile space that could drop another 10% in rapid fashion hence we recommend accumulating as opposed to an “all in” style approach, i.e. AKE has already fallen over -46% from its 2023 high. AKE flagged a $640mn cost blowout in September, with higher labour and material expenses cited as the major cause.

The Livent merger is set to be completed by the end of 2023 and the larger entity will likely be more appealing once things are all bedded down, although we prefer other Lithium stocks in the sector at this stage, i.e. stay with the better performers.

However overall we do like the negative press that’s surrounding the sector at present, a great contrarian indicator.

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Allkem Ltd (AKE)
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