Two months ago multiple lithium producers reported that they may not be able to produce enough lithium to meet the huge, coming demand from electric-vehicle makers. Usually, that’s a great situation. It means companies can sell all of the goods or services they offer. Even more promisingly, huge demand and limited supply indicate huge profits as prices rise. This is enough to make many investors consider their best lithium investment opportunities.
Notably, Albemarle (NYSE:ALB) forecast that lithium prices would rebound while the metal’s supply-demand dynamic would remain “tight” for the remainder of the year. At the end of July, Exxon (NYSE:XOM) CEO Darren Woods reported that the oil giant is considering entering the lithium sector, adding that XOM was impressed by its overview of the space.
Given all of these points, I’m confident that the lithium sector will be quite lucrative in the medium term. As a result, I believe that many investors will benefit a great deal from buying these three lithium stocks with huge potential.
Albemarle (ALB)
Albemarle (NYSE:ALB) reported quite strong second-quarter results earlier this month. Specifically, its net income came in at $650 million, way up from the $406.8 million of net income that it generated during Q2 of 2022.
Moreover, the company hiked its earnings per share projection for the full year to $25 – $29.50, versus its previous outlook of $20.75 – $25.75. In fact, ALB predicts that the amount of lithium that it sells will increase at a compound annual growth rate of 20%-30% from 2023 to 2027.
Investor’s Business Daily gives ALB stock a very high EPS rating of 98, and the company receives an “A” from IBD on its metric which measures Sales Growth, Profit Margins, and Return on Equity.
ALB stock has an extremely attractive forward price-earnings ratio of eight.
SQM (SQM)
In the first six months of the year, the net income of Chile-based lithium miner SQM (NYSE: SQM) fell to to $1.33 billion from $1.65 billion during the same period a year earlier. At the time, the company blamed a decline in lithium prices during the period for the drop in its profits.
However, the miner expects to sell more lithium in the second half of the year than it did in the first half. It stated that the fundamentals of the global lithium sector continue to be strong.
Backing up the latter assertion, SQM in July announced a huge, new six-year lithium supply deal with the giant South Korean battery maker, LG Energy. Additionally, SQM reported in May that it had made a lithium supply agreement with Ford Motor (NYSE:F).
SQM has an extremely low forward price-earnings ratio of seven, making it one of the lithium stocks with huge potential.
Livent (LTHM)
Last quarter, the net income of lithium miner Livent (NYSE:LTHM) rose 50% to $90.2 million compared to the same quarter a year earlier, while its top line climbed 8% year-over-year to $235.8 million.
Impressively, for the full year, if Livent achieves the midpoint of its guidance ranges, its sales would climb 32% and its EBITDA, excluding certain items, would jump 54%.
In May, Livent agreed to merge with Australian lithium miner Alkem (OTCMKTS:OROCF). As a result, the combined companies expect to save roughly $125 million of annual costs and another “$200 million of ‘one-time capital savings.’”
Also importantly, in addition to benefiting from the significant amount of lithium that Alkem produces, Livent is building several other significant lithium mines, including facilities in Argentina, North Carolina and China.
LTHM has a very attractive forward price-earnings ratio of ten.
On the date of publication, Larry Ramer 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.
