7 Lithium Stocks to Buy for the Next Bull Run: February 2024
Amidst the current market turbulence, shrewd investors are eyeing the dip in lithium prices as an ideal opportunity to wager on the most promising lithium stocks to buy. Lithium’s pivotal role in the burgeoning electric vehicle (EV) sector and high-tech industries positions for significant long-term expansion. Despite short-term market fluctuations, the long-term trajectory for lithium appears remarkably bright, with global demand for lithium batteries projected to quintuple by the end of the current decade. This surge is fueled by robust government backing for EVs and an anticipated supply gap that could make lithium more precious than ever by 2035. In this landscape, the savvy move is to look beyond temporary market jitters and focus on lithium stocks with strong fundamentals offering powerful long-term upside. These seven lithium stocks to buy fit the bill.
Lithium Stocks to Buy: Lithium Americas (LAC)
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Lithium Americas (NYSE:LAC) is usually one of the first few names that pop out in the lithium stock investing realm. It represents a remarkable investment opportunity, thanks to its Thacker Pass project in Nevada, the largest lithium deposit in the Western Hemisphere. Moreover, the company’s dedication to the project is evident in its recent operational restructuring, isolating the Nevada site to streamline development efficiently. The move signals the company’s robust belief in the project’s immense potential. While production isn’t slated until mid-2026, this deposit’s scale and strategic importance are hard to overstate.
Financially, Thacker Pass shines, boasting an incredible after-tax net present value of $5.7 billion. This figure underscores the project’s substantial future worth. Moreover, with a projected mine life of 40 years, Lithium Americas is not just looking at short-term gains but securing a horizon brimming with long-term cash flow opportunities.
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Albemarle (ALB)
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Currently priced under $110, Albemarle (NYSE:ALB) is a remarkably attractive lithium stock pick. Despite facing significant challenges at the back end of last year, mainly due to the downturn in the EV sector which dampened lithium demand, Albemarle’s prospects remain promising. This downturn in the EV industry led to a dramatic drop in lithium prices, impacting producers across the board. However, the sentiment is shifting, with expectations of a lithium price recovery as early as the latter part of 2024.
Furthermore, Albemarle’s performance from a fundamentals standpoint is commendable. The company reported a 10% increase in sales during the third quarter, a testament to its resilience even amid the market’s volatility.
Market analysts echo the long-term optimism surrounding ALB stock. RBC Capital maintains a ‘buy’ rating on Albemarle, setting a price target of $163. Additionally, based on 19 ratings, TipRanks reports a ‘moderate buy’ consensus for ALB stock. The projected upside is noteworthy, with analysts forecasting a potential 37.57% increase in stock price.
Lithium Stocks to Buy: Arcadium Lithium (ALTM)
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Arcadium Lithium (NYSE:ALTM), with a valuation exceeding $5 billion, emerges as a formidable force in the lithium sector following the merger of Allkem and Livent. This strategic unification positions ALTM as a leading integrated producer of lithium chemicals worldwide.
The company’s financial metrics are exceptional, to say the least, revealing a trajectory of impressive growth and profitability. A glance at ALTM’s forward EBITDA growth reveals a staggering 112.4%, significantly eclipsing the sector median of 0.67%. Similarly, ALTM’s forward revenue growth estimate stands at 54.7%, far surpassing the sector’s modest 2.31%, underscoring a robust outlook for revenue escalation. Moreover, the company boasts a trailing-twelve-month gross profit margin of 58.7%, doubling the sector median of 28.6%. These figures not only reflect ALTM’s financial prowess but also its operational efficiency.
Piedmont Lithium (PLL)
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Piedmont Lithium (NASDAQ:PLL) is on a promising trajectory to become a key player in North America’s lithium market, looking to develop one of the biggest sources of lithium in the region. Despite facing regulatory hurdles, Piedmont Lithium’s recent acquisition of an extension for additional data submission in its mine permit application process points to resilience in advance toward operational commencement.
Furthermore, the third quarter marked a monumental phase for Piedmont in transitioning the business from development to a revenue-generating entity. This shift was propelled by initiating customer shipments under its offtake agreement with North American Lithium, a joint venture that significantly bolstered its market positioning. Financially, Piedmont Lithium’s recently released report reveals a revenue figure of $47.1 million and an impressive gross profit margin of 50.4%, underscoring efficient operations and incredible market demand. The company’s solid financial footing is evident in its substantial cash reserves of $94.5 million and a net income of $22.9 million.
Lithium Stocks to Buy: Atlas Lithium (ATLX)
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Atlas Lithium (NASDAQ:ATLX) is strategically capitalizing on the burgeoning opportunities in Brazil’s Lithium Valley through its Neves project, which spans a whopping 2,684 hectares of mineral rights. The company’s recent exploration endeavors have effectively yielded significant results, confirming the presence of four spodumene-rich pegmatite bodies and uncovering six new promising zones, underscoring the massive potential of its project.
The company’s drilling efforts have been remarkably successful, with the discovery of 103.4 meters of continuous spodumene in its 58,497 meters of drilling, making it the largest find in the Brazilian Lithium Valley. Financially, Atlas Lithium is on solid ground, closing the third quarter with a robust $22.8 million in cash reserves while securing an additional $10 million through a private placement, reinforcing its stability and capacity for expansion.
Market analysts are taking note of Atlas Lithium’s potential, as evidenced by a ‘moderate Buy’ consensus from TipRanks, based on two ratings. The stock exhibits a significant upside potential, with a projected average target price of $45.50, translating to an impressive 151.94% increase from its current price.
Sigma Lithium (SGML)
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Sigma Lithium (NASDAQ:SGML), headquartered in Canada, has quickly emerged as a global player in the lithium market. Boasting an extensive portfolio, SGML operates four active mining sites in Grota do Cirilo, Sao Jose, Santa Clara, and Genipapo, along with additional promising locations in the exploration and evaluation stages.
Its most recent quarterly report marked its transition from an exploration entity to a full-fledged lithium producer. Moreover, its financial figures were compelling, posting substantial revenue of $97 million and a robust lithium production volume of 38,823 tons. Furthermore, the quarter concluded with an impressive net income of $36.4 million, a noteworthy figure given that it represents the company’s first operational quarter. On top of that, its operational efficiency and cost-effectiveness are admirable, contributing to an impressive 56% adjusted EBITDA and a 37% net profit margin. These financial metrics not only reflect the company’s strong financial health but also its strategic operational management.
Sociedad Quimica y Minera de Chile (SQM)
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Sociedad Quimica y Minera de Chile (NYSE:SQM) is a titan in the lithium industry facing its fair share of turbulence following Chilean President Gabriel Boric’s announcement to nationalize the country’s lithium sector. This move has cast a shadow of uncertainty over SQM’s future autonomy and valuation, triggering a decline in its share price. Despite the swirling speculations about Chile’s lithium strategy, it’s imperative to note that SQM’s contract runs through 2030, reducing its near-term impact.
While the future holds uncertainties, the global need for lithium is undeniable, with a fourfold increase in demand expected by 2030, leading to a potential supply shortfall of 0.3 million tons. This gap underscores the strategic importance of companies like SQM in the global market. Moreover, a closer look at SQM’s valuation metrics presents a compelling picture. Its forward price/earnings (P/E) Non-GAAP ratio is at a mere 5.37, behind the sector median by a significant 71.4. This, coupled with a robust dividend yield of 12%, positions SQM as a potentially undervalued player in the lithium market, offering robust upside.
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.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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