Harness the lithium resurgence with prices rebounding and long-term bullish prospects
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It has been a topsy-turvy few years for lithium stocks. The shiny, white metal’s price surged in 2021, growing by more than 800%, spurred by the growing EV demand. Consequently, we saw companies stockpiling supplies, and otherwise costly projects became viable following the rapid lithium price bump. However, since last year, EV demand has slowed, and the oversupply has led lithium prices to plummet to multi-year lows.
Of late, though, we’ve seen a resurgence in the market, with a 15% increase in lithium prices this year. Some experts believe prices have bottomed out, and it may be time to load up on the market’s finest. Moreover, lithium’s long-term bull case is also tough to ignore, making it an ideal time to bet on these three secret lithium plays.
Lithium Americas (LAC)
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Lithium Americas (NYSE:LAC) is not exactly a secret investment among green energy investors, but it has fallen out of favor recently. LAC stock is down more than 30% year-to-date (YTD) and roughly 82% from its all-time high price of $24.31. For reasons discussed earlier, the exploratory-stage lithium miner has flown under the radar.
Nevertheless, it continues to progress in reaching full production in its Thacker Pass Project in Northern Nevada. Construction began early last year, and construction activity is expected to ramp up rapidly in the second half of 2024. It hopes to achieve full capacity in 2028, recovering $3.9 billion worth of lithium, enough to supply batteries to one million EVs annually.
Furthermore, LAC has the resources to finance the initial development of its project, producing 40,000 metric tons of battery-grade lithium. Its stock popped by double-digits recently when it announced a whopping $2.26 billion financing commitment from the U.S. Department of Energy. Layer that up with the nifty $650 million investment from General Motors (NYSE:GM), and you have LAC in an excellent position to push forward with its plans.
Arcadium Lithium (ALTM)
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Arcadium Lithium (NYSE:ALTM) is a prominent force in the lithium mining space. It was born from the merger of Allkem and Livent. It has effectively leveraged the expertise of both companies to become one of the leaders in its niche. However, for obvious reasons, ALTM stock is down, and it is now one of the most attractive value plays in the sector.
It ended last year with robust sales of $882.5 million, up from $813.2 million in the prior-year period. Moreover, net income grew to $330.1 million from $273.5 million. Despite the decline in lithium prices, it delivered solid margin growth, aiming for a 40% increase in lithium hydroxide and carbonate production.
Naturally, Arcadium Lithium and many of its peers are unlikely to generate attractive returns in the short term. However, lithium prices are unlikely to stay depressed for long, and the upcoming interest rates could be a boon for the sector. Consequently, Tiprank’s analysts expect ALTM stock to offer a 74% upside from current price levels.
Global X Lithium & Battery Tech ETF (LIT)
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When in doubt, it is probably a good idea to bet on an ETF. The Global X Lithium & Battery Tech ETF (NYSEARCA:LIT) has holdings in 40 companies across the lithium and battery industries. It covers every stage of the lithium cycle, from mining and refining to battery production with investments in the market’s biggest players. Some of these companies include TDK Corporation (OTCMKTS:TTDKY) and Panasonic Holdings (OTCMKTS:PCRFY) to name a few.
The LIT ETF has been a rewarding investment over the years but has been remarkably risky at the same time. Renewables aren’t the safest of investments by any means, and investors in the LIT ETF are aware of that. Nevertheless, it gained an excellent 60% over the past five years, moving in line with the broader market. Moreover, during the EV sector boom from January 2020 to December 2021, it achieved a remarkable return exceeding 230%. Also, investing in it comes with a dividend, and though its 1.3% yield is far from inspiring, its 3-year payout growth stands at 32%.
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.
