Crisis will lead to opportunity for lithium stocks.
For one, the blood is flowing in the streets with many of the top lithium names. Two, some analysts now believe lithium prices may have bottomed out.
As noted by Bank of America analyst Steve Byrne, “2023 marked a huge drop in lithium prices, as the market flipped from the 2022 deficit into surplus. Inventory levels in China for lithium carbonate were elevated in February but started to trend down in March [and pricing] started to show some strength. While EV sales growth has slowed, it is still 20% for the next few years, and thus we expect the global lithium market to tighten near-term,” as quoted by Barron’s.
The analyst also believes lithium prices could average about $14,000 per metric ton this year. That’s up nicely from a prior call for $10,000 a ton.
That being said, investors may want to start buying beaten-down lithium stocks again now. Some of the top lithium stocks you may want to start accumulating include:
Albemarle (ALB)
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Since bottoming out at around $110, Albemarle (NYSE:ALB) is now up to $127.02. From here, I’d like to see it retest $140 near term. Helping, Bank of America analyst Byrne also upgraded the ALB stock to a buy rating with a price target of $156 from $137. Analysts at Citi also raised their price target on ALB to $135 from $125.
Even Loop Capital has a buy rating on ALB with a price target of $162 a share. The firm added, “The stock has bounced off its lows, owing to a commensurate move in spot lithium prices in China, and the nascent recovery in lithium prices could signal that the destocking downstream at cathode/cell/battery makers is reaching its conclusion,” as quoted by TheFly.com.
In addition, ALB carries a yield of 1.24% and is still inexpensive trading at 9.6x earnings. Also, before the herd wakes up to the opportunity, I’d start buying ALB beforehand.
Sociedad Quimica y Minera (SQM)
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With a yield of 9.87%, Sociedad Quimica y Minera (NYSE:SQM) is another top lithium stock to buy and hold now. After bottoming out at around $41, it’s now up to around $50 where it’s been consolidating since late February. From here, I’d like to see it break out and rally back to $64 on a lithium price recovery.
Helping, analysts at Jefferies see SQM as an attractively valued play, upgrading it to a buy rating. The firm also raised its price target on the lithium stock by $10 to $62.80. “Whilst we remain cautious on lithium prices, we see attractive value emerging in SQM given the reshaping that the company is undergoing,” they said, as quoted by CNBC. The firm also noted that “the market underappreciates SQM’s low-cash cost advantage in the lithium space.”
And while earnings weren’t so hot, that’s to be expected in the current environment. Fortunately, CEO Ricardo Ramos is still very bullish, seeing record-high sales volumes in the lithium business as well as growth in its iodine and potassium markets.
Sigma Lithium (SGML)
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Another top lithium stock to buy and hold is Sigma Lithium (NASDAQ:SGML).
Over the last few days, the SGML stock bounced from double-bottom support dating back to late February. Now up to $15.34, if it can break above resistance, it could potentially retest $20 a share, near-term. Helping, analysts at Bank of America raised their price target on the stock to $29 from $27, with a buy rating.
As noted by TheFly.com, “Sigma’s resource expansion as well as recent closing of $90M in trade finance credit lines increases the firm’s confidence that Phase 2 and 3 will be able to start producing in 2025,” added the firm.
In addition, the company just announced it will double production of its Quintuple Zero Green Lithium – which is produced at its Greentech lithium plant that uses 100% renewable energy, 100% recycled water, and 100% dry-stacked tailings – to 520,000 tons per year. Plus, Sigma has plans to commission its Phase 2 Industrial Plant by year-end, with production expected by 2025.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
