Some investors might seek to gain portfolio exposure to the lithium industry because we use lithium in batteries for electric vehicles. That’s fine, but it doesn’t mean every lithium miner deserves your hard-earned capital. Piedmont Lithium (NASDAQ:PLL) stock is a good example of this, as it has been on a downtrend and the future prospects aren’t favorable.
Piedmont Lithium is headquartered in North Carolina and focuses on lithium mining projects in that state as well as in surrounding states. However, as we’ll discuss in a moment, the company is spending money on a venture in Canada. This might sound intriguing, but for prospective investors in Piedmont Lithium, the best phrase to remember is “buyer beware.”
PLL Stock’s Poor Performance in 2023
Remember, commodity mining stocks involve an elevated level of risk. Prudent investors should stick to winners and generally avoid poor performers in this sector.
For instance, PLL stock popped to $76 this year but then recently dropped below $30. That put the stock at a loss for the year.
There really wasn’t any consolation prize, as Piedmont Lithium doesn’t pay any dividends. Piedmont Lithium’s investors were disappointed to discover that the company’s proposed lithium project in Gaston County, North Carolina, might not begin production until 2027.
On top of all that, B. Riley analysts reportedly cut their PLL stock price target from $95 to $57. Given the stock’s recent drawdown, the B. Riley analysts might end up having to cut their price target again soon.
Piedmont Lithium: Unprofitable, but Still Spending
Make no mistake about it: Piedmont Lithium has no problem with spending money on speculative mining investments. For example, per TheFly, Piedmont Lithium is making a “commitment of approximately” $128 million toward a lithium mining project with Atlantic Lithium (OTCMKTS:ALLIF).
Piedmont Lithium agreed to pay $2 million CAD (Canadian dollars) for a 19.9% equity interest in Vinland Lithium, with the aim of developing a lithium project in Newfoundland, Canada. Vinland Lithium is described as a “new entity,” so investors should consider Piedmont Lithium’s capital investment to be highly speculative.
These large-scale capital outlays might be more sensible if Piedmont Lithium had a track record of profitability. However, that’s not the case, unfortunately.
A quick check on Seeking Alpha reveals four consecutive negative-EPS quarters. Those same quarters produced negative earnings surprises, meaning Piedmont Lithium’s quarterly EPS results came in below Wall Street’s consensus estimates.
The Downtrend Could Easily Continue With PLL Stock
Could Piedmont Lithium hit the jackpot with its large-scale investments in U.S. and Canadian lithium projects? Sure, anything’s possible.
Piedmont Lithium’s capital outlays involve risk. The company doesn’t have a good track record of profitability. These are issues that hopeful EV-commodity investors need to consider.
Investing in Piedmont Lithium would be highly speculative. The risk-to-reward proposition isn’t favorable enough for us to recommend PLL stock, and we’re assigning it a “D” grade.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
