3 Lithium Stocks to Invest In for Big-Time, Long-Term Gains
It’s not been a great year for lithium stocks.
With lithium correcting after a big rally, stocks have followed the trend. However, there’s little doubt on the point that the demand for lithium will stay strong beyond the decade. The correction is therefore a good opportunity to consider the best lithium stocks to buy and hold.
Coming back to the demand for lithium, the rising adoption of electric vehicles is the single biggest catalyst. Importantly, the investment in lithium has been behind the curve. It’s expected that by 2035, the lithium supply gap is expected to be at least 1.1 million metric tons, or 24% lower than the demand.
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Therefore, it’s clear that lithium will continue to trend higher in the coming years. This is bullish for lithium stocks, and emerging lithium miners can create massive value in the next five to ten years.
Let’s discuss three lithium stocks to buy and hold for robust returns.
Albemarle Corporation (ALB)
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Albemarle Corporation (NYSE:ALB) stock is the best name among lithium stocks to buy and hold. ALB stock trades at a forward price-earnings ratio of 7.1 and can potentially double in the next 24 months. Additionally, ALB stock offers a dividend yield of 0.84%, making it among the best dividend growth stocks to consider.
While ALB stock trades at a significant valuation gap, the company is on a high-growth trajectory. For 2023, the company expects revenue growth in the range of 40% to 55%.
It’s also worth noting that the company ended 2022 with lithium conversion capacity of 200ktpa. The company has guided for capacity of 500 to 600ktpa by 2027. With robust cash flows, Albemarle is positioned for sustained capacity expansion. This will translate into cash flow upside and shareholder value creation. Overall, with a positive outlook for lithium in the long-term, ALB stock is positioned for multibagger returns.
Lithium Americas (LAC)
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Lithium Americas (NYSE:LAC) stock has declined by 38% in the last 12 months. The correction presents a good entry opportunity with the company having high-quality assets that will deliver long term value.
First, Lithium Americas received shareholder approval last month for the split of U.S. and Argentina business. This is likely to unlock value, since it’s not yet been factored into the stock’s discount.
Further, the company’s Thacker Pass project in the U.S. is a potential cash flow machine. The asset has an after-tax net present value of $5.7 billion. In year four, the asset will have an annual EBITDA of $1.1 billion. Additionally, the peak EBITDA from the asset is expected at $2 billion. With a mine life of 40 years, Thacker Pass will create immense value.
Once the asset commences delivering robust cash flow, Lithium Americas will be positioned to make big investments in other assets. LAC stock is therefore worth holding until 2030.
Piedmont Lithium (PLL)
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Piedmont Lithium (NASDAQ:PLL) is another quality name among lithium stocks to buy and hold. The current market valuation of $870 million for the company seems attractive. I believe that PLL stock is poised for multibagger returns in the next 36 months.
The Company has 100% ownership in the Carolina project that has an after-tax net present value of $2 billion. The project is expected to deliver first lithium in 2026. Further, the Tennessee Lithium project has an after-tax net present value of $2.5 billion with first production due in 2025. For the Tennessee project, the company has received final permit to advance construction.
These are the prized assets for the company. PLL stock will surge higher if production commences according to the time-line. Additionally, Piedmont has 25% ownership stake in the Quebec project. It’s worth noting that commercial shipments from this project will commence in Q3. This is expected to generate revenue and cash flows.
On the date of publication, Faisal Humayun did not hold (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
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
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