7 Lithium Stocks Sitting in the Sweet Spot

Electric vehicles are a megatrend, but megatrends take time to develop. One day our grandchildren may look back on 2023 with amazement at how primitive our vehicles were. But that day is not today. And that’s why a better way to invest in the transition to EVs is by finding lithium stocks to buy.  

Lithium is an essential component of lithium-ion batteries. And those batteries are, for now, the de facto standard for electric vehicles, while the demand for lithium far outweighs the supply of it. That means there’s still time to invest in lithium stocks.   

So for now, investing in lithium stock is a practical, picks-and-shovel approach to the transition to electric vehicles.  

Lithium Americas (LAC)

 

Leading off this list of lithium stocks to buy is Lithium Americas (NYSE:LAC). LAC is a pre-revenue company, but it recently received a Record of Decision (ROD) from a court for its Thacker Pass project. This gives the company the opportunity to begin extracting what it estimates will be 13.7 million Tonnes of lithium carbonate. 

If that forecast is correct, the company will have the largest lithium mine in the United States. And that’s gained the attention of one EV maker, General Motors (NYSE:GM). Lithium Americas and GM recently signed a $650 milion contract to co-develop the Thacker Pass mine. Mining at Thacker Pass isn’t expected to start until 2026. But the company plans to begin mining at its joint-venture mine in Argentina later this year.  

Fundamentally, there’s not much to say about the company since it’s not yet generating revenue. However, analysts are generally bullish on LAC stock. Their mean price target on the name is $37.versus  the stock’s current price of $20.75.  

Piedmont Lithium (PLL)

 

Many investors are becoming familiar with the term “onshoring.” This is the process by which U.S. companies are moving factories back to the United States. The federal government  clearly made supporting this trend a priority in the 2021 Infrastructure Law which provides funding to domestic lithium miners. Piedmont Lithium (NASDAQ:PLL) is well-positioned for this trend with mining projects in North Carolina and Tennessee. The company also has projects in Ghana and Quebec. 

Another catalyst for PLL stock is the agreement that the company has with Tesla (NASDAQ;TSLA) to deliver approximately 125,000 metric tons of lithium starting sometime this year and continuing through the end of 2025. But PLL won’t realize any revenue from the deal for at least a year, and the collaboration won’t be profitable for PLL for some time after that.  

Still, analysts, on average,  are forecasting earnings per share (EPS) growth of over 230% over the next five years for PLL. Many of those same analysts are bullish on Piedmont Lithium stock, giving it a mean price target of $109.  

Albemarle (ALB)

 

Next on this list of lithium stocks to buy is another mining company, Albemarle (NYSE:ALB). ALB is not a pure-play lithium stock, but the company received $150 million from the U.S. government thanks to the 2021 Infrastructure Law. That ensures that lithium is likely to be a major focus of the company’s business in 2023 and beyond.  

For investors looking for an under-the-radar startup, Albemarle is not a good candidate. ALB is an established, blue-chip stock, but ALB’s top-and-bottom lines have been growing nearly 10% annually,  indicating that the shares are undervalued at their current price-earnings ratio of just nine times. And analysts generally expect that it will continue to grow both its revenue and its profit in the high single-digit-percentage range for the next five years. 

Albemarle is also a dividend aristocrat, having increased its dividend in each of the last 30 years. To be sure, there are better dividend stocks out there, but the company’s ability to pay a dividend shows that it’s a  stable firm.  

Sociedad Quimica y Minera (SQM)

 

Sociedad Quimica y Minera (NYSE:SQM) is not a pure-play lithium stock, but it is currently the world’s leading lithium producer. That’s reflected in the company’s revenue and earnings, both of which are consistently growing.  

By almost every fundamental metric, SQM stock offers good value. The company’s return on equity, return on assets, and profit margin are significantly higher than the averages of its sector. And Sociedad Quimica y Minera has a tiny P/E ratio of 5.9 times with a forward P/E ratio of 5.62 times. That makes its  valuation very attractive. 

And I’d be remiss not to mention that the company pays a dividend which currently has  a whopping yield of 9.5%. But that dividend could very well be cut in the not-too-distant future.

The company’s earnings per share, however, grew by over 798% last year.  But its  average earnings growth in the last five years has been around 14%. That’s still great growth, but it’s likely not enough to support a 9% dividend yield. 

Livent (LTHM)

 

So far, this list of lithium stocks to buy has focused on lithium miners. That’s because the first step in providing lithium  to EV makers is extracting the lithium. Livent (NYSE:LTHM) carries out the next step,, which involves combining lithium with other chemicals. And continuing with our onshoring theme, I will  note that Livent has a lithium hydroxide plant in North Carolina.  

Livent has “cost leadership in lithium carbonate, lithium hydroxide and lithium choloride.” The company’s manufacturing footprint spans six sites in five countries. The small-cap company has only been trading publicly since 2018. However, in that time, the company has been solidly profitable and has generated meaningful top-line growth.  

And analysts, on average, expect the firm to deliver mean revenue growth of over 15% and earnings growth of over 29% in each of the next five years. That would be enough to justify their average price target of $33.39. 

American Lithium (AMLI)

 

The overall premise of this list of lithium stocks to buy is that American companies want to gain control of their supply chains. And as American Lithium’s (NASDAQ:AMLI) name implies, onshoring is the catalyst for AMLI stock . The company has two advanced-stage lithium projects in development in the Americas.  

The first is the Tonopah Lithium Co. (TLCP) project in Nevada. It also has the Falchani Lithium Project in Peru which, according to the company, is the sixth-largest lithium deposit in the world. Even with AMLI’s earnings expected to grow by an average of approximately 16% over each of the next five years, American Lithium is not expected to turn a profit in that time.  

Nevertheless, analysts are generally bullish on AMLI stock. Their mean price target is $5.81.

Noram Lithium (NRVTF)

 

If you’re still looking for more speculative lithium stocks to buy, Noram Lithium (OTCMKTS:NRVTF) may scratch that itch. Like many stocks on this list, the company is trying to mine lithium in the Americas. Specifically, the company is trying to advance its 100%-owned Zeus Lithium Project in Nevada.  

As InvestorPlace columnist Alex Sirois pointed out in January, this project’s location puts it near both Albemarle’s Silver Peak mine and Tesla’s (NASDAQ:TSLA).  Nevada gigafactory.   

Noram Lithium is a pre-revenue company although it claims that the $14 million of strategic financing it received in 2022 will be enough to keep it funded through the end of 2023. And it may receive funding from the U.S. government as a result of the Infrastructure Law. 

On the date of publication, Chris Markoch did not have (either directly or indirectly) 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.