Lithium stocks have suffered sharp declines in 2023. The price of lithium carbonate has cratered 77% YTD, on the back of higher supply and lower EV sales volume in China. Lithium is a key component within the electric vehicle battery supply chain. It is also needed to meet the growing demand of energy storage systems. Investors have been put on edge this year as the commodity continues to reverse course. This has led to this list of top rated lithium stocks to buy.
From 2020 – 2022, the price of lithium carbonate ballooned to record highs of $84,500 per tonne. However, as interest rates rose in the back half of 2022 and global EV demand decelerated, lithium prices fell alongside it. Despite the rapid shift in supply-demand dynamics, global lithium demand will continue to rise over the next decade. In fact, Fortune Business Insights estimates the market to grow at a 22.1% CAGR from 2023 to 2030. With that in mind, investors have a unique opportunity to buy lithium stocks on weakness.
Below are three top rated lithium stocks to scoop up before the end of 2023!
Albemarle (ALB)
Albemarle (NYSE:ALB) is a poster child for the best top rated lithium stocks to buy. The company has benefited tremendously from the rising global demand for lithium in EV batteries. For FY 2022, Albemarle’s revenue rose 120% YOY to $7.3 billion. Net income was $2.69 billion, or $22.84 per share. Operational excellence was largely supported by stronger execution and growth beyond the EV market.
However, 2023 has been a more challenging year for Albemarle. In their recent Q3 2023 financial results, Albemarle’s net income and EPS fell 66% YOY. Although the company saw double digit sales growth in the quarter, the impacts of the current supply demand dynamics have been material. This led to the company cutting their FY 2023 net sales and adjusted EBITDA outlook.
Albemarle still remains bullish on the long term growth prospects of the EV market and its booming energy storage business. With their new mining and conversion capacity, they now expect 30-35% growth in their energy storage. They are also well diversified, owning two world-class Lithium mines in Chile and Silverpeak, Nevada.
TipRanks analysts have given ALB a moderate buy rating, with 51% upside potential. If you’re bullish on the long term outlook of electric vehicles (EVs) and energy storage systems, Albemarle is a top lithium stock to buy on weakness.
Sociedad Quimica y Minr de Chile SA (SQM)
Sociedad Quimica y Minr de Chile SA (NYSE:SQM) is a South American chemical company based in Santiago, Chile. They are one of the largest lithium producers in the world for EVs and energy storage systems. Over the last 2 years, SQM has seen impressive revenue and Earnings Per Share growth. In its latest FY 2022 results, SQM revenue grew 274% to $10.7 billion. During the same period, EPS skyrocketed 550% to $12.68 per share.
But investors should be aware that the commodity market is extremely volatile, and SQM is facing its fair share of challenges in 2023. In Q3 2023, SQM revenue fell 38% YOY to $1.8 billion. Net income also declined 56% YOY, or $1.68 per share. This was largely attributed to lower average sales per metric tonne and excess lithium inventories. Despite the current circumstances, CEO Ricardo Ramos is bullish on the long term demand growth of lithium, particularly for EV batteries. But investors should be aware that Chile’s plan to nationalize its lithium reserves may pose systemic risks to the company.
You will be better off scooping up shares of U.S.-based Albemarle (NYSE:ALB). TipRanks analysts have given SQM a moderate buy rating, with an anticipated 45% upside. If you’re more risk-tolerant, SQM should be kept on your watchlist going into the new year.
Sigma Lithium Corp (SGML)
Sigma Lithium Corp (NASDAQ:SGML) is a Canadian-based lithium mining company that is making significant strides in the industry. Their 100% green-powered lithium deposits are located in Brazil’s Minas Gerais State. The company’s mine has set a new standard for sustainable mining practices, with 100% of the water used being recirculated back into the mine. But investors have been paying close attention in the last week, as the company achieved a 37% net profit margin in their first operational quarter.
Just like any other mining company, Sigma Lithium operated at a loss for many years before reaching this critical point. They now have the ability to generate robust FCF from their Grota do Cirilo mine. During the quarter, the company saw adjusted EBITDA of $54.6 million. Additionally, Sigma estimates their lithium output to reach 130 Mt after announcing positive results from their Phase 4 and Phase 5 programs.
TipRanks analysts have given SGML a strong buy rating, with an approximate 48% upside. As global demand for EV picks back up in 2024, Sigma Lithium is among the best top rated buy lithium stocks to consider.
On the date of publication, Terel Miles 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.
