While electric vehicles may one day dominate global roadways, figuring out which EV brand will win out presents big challenges, thereby organically bolstering the case for the best lithium stocks to buy. Rather than wagering on a team to win the big matchup, acquiring lithium miners is akin to selling tickets to the game. It might be a less-exciting venture, but you’re more likely to profit.
In addition, the underlying sector should prove quite lucrative. According to Grand View Research, the global lithium market reached a valuation of $7.49 billion last year. Further, experts project that the sector will expand at a compound annual growth rate (CAGR) of 12.3% from 2023 to 2030. By the culmination of the forecasted period, the industry should hit $18.99 billion. And that’s why the search term “lithium stocks 2023” generates much attention. Below, you’ll find various lithium mining stocks, ranked according to their risk-reward profile.
Sociedad Quimica y Minera de Chile
Pilbara Minerals (PILBF)
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Based in West Perth, Australia, Pilbara Minerals (OTCMKTS:PILBF) mines both lithium and tantalite. Its main operations center on the company’s 100%-owned Pilgangoora Project, located in the resource-rich Pilbara region, hence the name. Further, Pilbara’s website states that the Pilgangoora ore body is one of the largest hard rock lithium deposits in the world. It’s also considered strategically important within the global lithium supply chain.
Financially, the mining enterprise enjoys a decent profile considering that shares trade over the counter. Notably, Pilbara commands a strong balance sheet, particularly an Altman Z-Score that pings at a lofty 13.02. This indicates high fiscal stability and a low risk of imminent bankruptcy.
Operationally, the company enjoys a blistering triple-digit figure for its three-year revenue growth rate that will surely fade over time. However, its book growth rate during the aforementioned period legitimately impresses at 31.7%.
Finally, Wall Street analysts peg PILBF as a consensus moderate buy. Their average price target comes out to $3.30, implying over 16% upside potential. Thus, it’s well worth considering for lithium stocks to buy.
Sociedad Quimica (SQM)
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A Chilean chemical company, Sociedad Quimica (NYSE:SQM) is a supplier of plant nutrients, iodine, and industrial chemicals. Of course, SQM generates the most attention as one of the best lithium stocks to buy because of the subject matter at hand. Although incredibly relevant for its lithium production, SQM hasn’t fared well in the market this year, slipping 12%.
Nevertheless, SQM deserves a second look at its overall financial performance. First, it benefits from stability in the balance sheet. For example, its debt-to-EBITDA sits at 0.51. In contrast, the sector median stat hits 1.82 times. Also, the enterprise enjoys a strong Altman Z-Score of 5.39.
Operationally, SQM commands a three-year book growth rate of 36.4%, outpacing nearly 91% of the field. On the bottom line, its net margin of 36.39% blows past 97.38% of competitors. Lastly, covering analysts peg SQM as a consensus moderate buy. On average, their price target hits $101.89, implying 51% upside potential.
Sigma Lithium (SGML)
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Headquartered in Vancouver, British Columbia but focused on Brazil, Sigma Lithium (NASDAQ:SGML) is one of the most exciting lithium battery stocks to buy. Per its website, Sigma stands among the largest, highest grade, and lowest cost hard rock lithium producers in the world. Further, it claims that its state-of-the-art Greentech plant at Grota do Cirilo features 100% dry-stacked tailings, 100% clean energy, 100% recycled water, and zero hazardous chemicals.
Fundamentally, Sigma’s environmental focus underscores a critical issue. One of the dark secrets of lithium mining stocks is that it requires 2.2 million liters of water to produce one ton of lithium. Given that we already have a global water crisis, increased lithium production without sustainability protocols would simply not be viable.
To be sure, Sigma largely features an aspirational profile, based on its negative FCF growth rate and other not-so-encouraging stats. However, analysts really love SGML, pegging it a unanimous strong buy. On average, their price target lands at $52.96, implying over 52% upside potential.
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Founded in 1994, Albemarle (NYSE:ALB) is an American specialty chemicals manufacturing company based in Charlotte, North Carolina. Per its public profile, Albemarle operates three divisions: lithium, bromine specialties, and catalysts. As of 2020, the company represented the largest provider of the underlying metal for EV batteries in the world. Thus, it’s a natural idea for lithium battery stocks.
Financially, Albemarle enjoys a broadly robust footprint. For starters, it carries decent stability in the balance sheet, with a debt-to-EBITDA ratio of 1.16. In contrast, the sector median stat comes out to a loftier 1.82 times. Also, its Altman Z-Score is 3.47, featuring a modestly low risk of bankruptcy.
Operationally, Albemarle’s three-year revenue growth rate hits 22.6%, ranked better than 84.37% of companies listed in the chemicals industry. On the bottom line, its net margin is an impressive 36.75%, outpacing 97.52% of the field. Turning to Wall Street, analysts peg ALB as a consensus moderate buy. Their average price target posts up at $283.87, implying 53% growth potential.
Lithium Americas (LAC)
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A popular name among the best lithium stocks to buy, Lithium Americas (NYSE:LAC) is focused on advancing lithium projects in Argentina and the U.S. to production, per its website. So far this year, the market has been treating the company well, gaining 12% since the Jan. opener. However, in the past 365 days, LAC gave up almost 21% of its equity value.
Geared toward the speculator, Lithium Americas will require some patience. Okay, it will require a lot of patience. Posting no revenue since 2017, the company is currently undergoing a major strategic pivot. As a result, it continues to post net losses. So far on the retained earnings line item, it’s looking at a loss of $272 million.
Understandably, it’s an ugly figure. On the other hand, Wall Street analysts peg LAC as a unanimous strong buy. And that’s among five experts. Indeed, over the past nine months, 11 analysts have covered LAC and the worst rating is a hold. On average, the price target stands at $32.86, implying over 64% upside potential.
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One of the lithium stocks to buy only for those that consider themselves extreme speculators, Ioneer (OTCMKTS:GSCCF) takes the high risk to a whole new level. Priced at 21 cents per share at the time of writing, GSCCF represents a pure market gamble. Since the Jan. opener, shares stumbled more than 17% but that’s not the worst of it. In the trailing one-year period, they cratered by nearly 58%.
Headquartered in New South Wales, Australia, Ioneer bills itself as an emerging lithium-boron producer set to develop one of the most attractive lithium projects globally. Per its website, the company’s 100%-owned Rhyolite Ridge Lithium-Boron Project in Nevada provides an important foundation to provide the U.S. supply chains with these critical minerals in a responsible and profitable way.
Before you dive in on this marketing pitch, investors should consider the financials. Setting aside its cash-rich balance sheet, the company suffers from negative EBITDA and FCF growth. Also, it should be mentioned that Ioneer is a pre-revenue enterprise. Still, analysts surprisingly peg shares as a moderate buy. Their average price target comes out to 36 cents, implying 74% upside potential.
American Lithium (AMLI)
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If Ioneer wasn’t enough of a speculative idea among lithium stocks to buy, then American Lithium (NASDAQ:AMLI) would be the next step higher on the speculation spectrum. And I’m not entirely sure if there are any more steps higher. Priced at $2.12, AMLI seems a more “reasonable” market idea. However, you only need to look at its five-year chart to understand the dangers.
Since skyrocketing from the doldrums of 2020, AMLI launched into the stratosphere. However, because of its incredibly choppy price action, it’s difficult to say if AMLI reached a baseline of support. Should a corrective cycle materialize, the subsequent panicking could see shares slip below the $1 level.
Fortunately, American Lithium enjoys a cash-rich balance sheet relative to its debt load. But we’re also talking about yet another pre-revenue business. Should the marketing literature that management pumps out not come true, AMLI could implode, simple as that. Surprisingly, though, we have another unanimous strong buy rating. Here, analysts target a price of $5.41, implying over 155% upside potential.
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.