ASX lithium shares have dramatically shaken off their recent slump. Having wallowed near multi-year lows, their prices have skyrocketed in recent months, fueled by a rebound in battery demand and tightening supply.

Benchmark spodumene prices are shattering levels unseen for years, and Australian lithium stocks are reacting with remarkable speed.

ASX lithium shares such as Liontown Resources Ltd (ASX: LTR), IGO Ltd (ASX: IGO), and Core Lithium Ltd (ASX: CXO) have all catapulted to fresh 52-week highs as the market starts to factor in a new, demand-driven cycle.

Investors are beginning to believe the severe 2023–24 bear market is finally behind them. However, the critical question remains: can this lithium rally maintain its strength?

Liontown Resources

This ASX lithium share epitomizes a comeback tale. Largely dismissed during the downturn, the company has re-emerged as a flagship for the lithium rebound, primarily due to its promising Kathleen Valley project.

Its shares have exploded by 173% over the past year, driven by a combination of rising spodumene prices and shipments secured under long-term offtake agreements. A robust cash position and strategic partnerships with battery manufacturers lend further credibility to the surge.

Nevertheless, Liontown's earnings are still highly vulnerable to lithium price fluctuations, and cost inflation could pose a serious threat if the market cycle reverses. Should prices remain firm, the stock may continue its upward trajectory, but its story remains heavily dependent on momentum.

Broker sentiment is mixed. However, Bell Potter maintains a bullish outlook on this lithium miner, issuing a buy rating with a $2.42 price target. This indicates a potential 34% upside over the coming 12 months.

The broker asserts that the company is exceptionally well-positioned to capitalize on rising lithium prices, citing the strength and quality of its Kathleen Valley project.

IGO

This ASX lithium stock presents a more stable avenue for exposure to the theme. Unlike pure-play lithium miners, IGO benefits from diversified exposure to nickel and copper, which helps buffer against commodity price swings.

Recent financial results revealed a sharp increase in EBITDA, underscoring the resilience of its broader operations, even as challenges in lithium processing persist. Its stake in the Greenbushes mine and involvement in downstream refining offer long-term leverage but also introduce operational complexity.

Investors seeking stability over explosive growth may favor IGO, particularly if base metals continue to provide supportive market conditions.

Analysts exhibit caution, with most assigning the ASX lithium share a neutral rating. The average 12-month price target sits at $8.32, which is identical to the share price at the time of writing.

Core Lithium

Core Lithium represents the high-risk, high-reward proposition. After halting production at the lowest point of the downturn, the ASX lithium share is now preparing to restart its Finniss project, backed by increased reserves and more cost-effective plans.

The market has enthusiastically embraced this turnaround narrative, propelling the share price up by 164% over the past 12 months. Significant execution risk remains, and securing funding is a perpetual challenge. If lithium prices stay high and the restart is successful, the potential upside could be substantial.

In January, Canaccord Genuity reaffirmed its buy rating on the ASX lithium share and increased its price target from 27 cents to 40 cents.

This implies a potential upside exceeding 65% over the next 12 months.