Diving into lithium stocks during these challenging times for the underlying market may seem audacious. Recent data from TrendForce showed a substantial dip in lithium prices last month, spurred by the downstream battery sector’s push to limit inventory. The demand for lithium salts has slowed substantially, and the short-term oversupply has resulted in the lowest prices of the year. Currently, the market sentiment towards lithium stocks remains bearish, making these stocks significantly undervalued.
Despite the current slowdown, several industry experts anticipate a shift. Estimates suggest that by the end of 2025, the market could face a modest deficit of 40,000 to 60,000 tonnes of lithium carbonate equivalent. Moreover, this shortfall is likely to get even steeper, reaching 768,000 tonnes by 2030.
Hence, with that backdrop, it’s an ideal time to invest in lithium stocks, anticipating substantial long-term growth in demand. These lithium stocks stand to benefit the most from the rebound, offering superb upside from their current prices.
Lithium Stocks to Buy: Albemarle (ALB)
Albemarle (NYSE:ALB) is a heavyweight in the specialty chemicals arena, holding a dominant position in the lithium and bromine markets. With the expansion in the EV sphere over the past few years, ALB’s focus has mostly been on its lithium mining operation.
However, lithium carbonate prices have tumbled with the supply-demand deficit in the EV space, weighing down ALB stock. Despite the dip in spot prices, though, it’s essential to look beyond these short-term fluctuations and recognize ALB stock’s long-term growth runway.
Concerns over the sustainability of lithium producers such as ALB have been overly exaggerated. As discussed earlier, the recent lithium price correction should not overshadow the long-term bull case for ALB and its peers. Moreover, following the dip, ALB stock trades at an attractive 2x forward sales estimates, roughly 50% below the sector median. Also, considering the inevitable rebound in commodities like lithium, Albemarle’s positioning in the market is particularly promising.
Arcadium Lithium (ALTM)
Arcadium Lithium (NYSE:ALTM) is an innovative force in the lithium space, making waves with advanced extraction and processing technologies. Moreover, with substantial lithium reserves, ALTM continues to expand its reach.
In the first quarter (Q1), the firm demonstrated a robust 3% growth in sales to $261.2 million, with its EPS of 6 cents, surpassing estimates by a couple of cents. Furthermore, it achieved an average realized lithium hydroxide and carbonate prices above $20,000 per metric ton, solidifying its financial strength.
Looking ahead, ALTM’s future appears remarkably bright. It’s on course to realize roughly $60 to $80 million in synergies and cost reductions this year. Additionally, its ambitious expansion plans involve taking production capacity to 170,000 LCEs by 2026. Moreover, analysts forecast a healthy revenue increase of 34% to $1.19 billion this year and an even more staggering growth to $1.61 billion by 2025. Hence, ALTM is poised for significant growth, making it a standout investment opportunity in the lithium market.
Lithium Americas (LAC)
Lithium Americas (NYSE:LAC) is one of the most talked-about lithium stocks, with tremendous asset potential. Moreover, over the past few years, it has acquired substantial financial backing for its projects. This firm foundation positions it well for superb upside as the market sentiment for lithium improves.
LAC is known for its famous Thacker Pass asset, boasting an impressive after-tax net present value of $5.7 billion. Additionally, initiating both production phases could generate an average annual EBITDA of $2 billion.
Furthermore, in March, it secured a conditional commitment for a $2.26 billion loan from the U.S. Department of Energy, supplemented by a $650 million liquidity boost in two tranches from General Motors (NYSE:GM). Therefore, the company has the impetus to take things up a notch with its business, positioning it for substantial future returns. Moreover, despite more than a 50% drop in its stock price year-to-date, the intrinsic value of Lithium Americas’ assets remains undiminished.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
