Beaten-down lithium prices aren’t sustainable. In fact, according to The Wall Street Journal, prices have fallen too much to cover the cost of supply needed for electric vehicles (EVs). All of which will eventually lead to a monster opportunity for lithium stocks to buy.
“A recovery isn’t yet in sight, but one will have to come eventually. Lithium prices are now too low to justify a chunk of today’s ore extraction in Australia and China, let alone investment in new production necessary to feed expected growth in the EV market. That is setting up the conditions for a shortage and rally,” they added.
We also have to consider that, “With some lithium mines shutting down or reducing production we could see less supply. This could help stabilize prices and send lithium prices higher with demand,” as I noted on Jan. 21.
All things considered, I’d start accumulating lithium stocks on the cheap now.
“People are always asking me where is the outlook good, but that’s the wrong question. The right question is: Where is the outlook the most miserable? In almost every activity of normal life people try to go where the outlook is best. You look for a job in an industry with a good future, or build a factory where the prospects are best. But my contention is if you’re selecting publicly traded investment, you have to do the opposite.”
With that, here are seven top lithium stocks to buy.
Albemarle (ALB)
Investors are aggressively buying Albemarle (NYSE:ALB).
Since bottoming out around $110, the stock is now up to $131.74, and is close to refilling its bearish gap around $140. From here, if ALB can break above resistance at $142.73, it could potentially retest $150 near term. Helping, the stock is still inexpensive, trading at just 9.6x earnings, 1.6x book, with a yield of about 1.24% at the moment. Plus, Oppenheimer analyst Colin Rusch has an “outperform” rating on the stock, with a price target of $188.
Once lithium prices finally bottom out, I expect for ALB to be one of the big winners. In the meantime, as we wait, at least we can collect its dividend. On Feb. 22, the company announced a quarterly dividend of 40 cents ($1.60 annualized), payable April 1 to shareholders of record as of March 15. If you missed this one, more should be on the way.
Arcadium Lithium (ALTM)
Another one of the top lithium stocks to buy is Arcadium Lithium (NYSE:ALTM).
The $4.63 billion company that combined Allkem and Livent to create one of the world’s biggest lithium companies is also inexpensive at $4.31. Technically, the chart is a disaster. But that’s to be expected with depressed lithium prices. Given time, and an overdue recovery, I’d like to see ALTM back at $5.50 initially. From there, it has a gap to refill around $5.75.
Also, CEO Paul Graves recently said:
“It is clear that very few lithium expansion projects make economic sense at current market prices, and the longer prices stay near these levels the greater the impact will be on future supply shortfalls. As we saw in 2022, this will increase the likelihood of a rapid increase in future lithium prices,” as quoted in a company release.
Once that happens, ALTM will be very well positioned for upside.
Helping, Loop Capital has a “buy” rating, with a price target of $9 a share.
Sociedad Quimica y Minera (SQM)
With a yield of 10.22%, Sociedad Quimica y Minera (NYSE:SQM) we can get paid to wait for recovery here, too. At the moment, it’s consolidating at around $49 a share. From here, I’d like to see it test its December high of $64. It’s also still trading at 6.8x earnings, and 1.8x sales, which is far less than its five-year average of 4.54.
Earnings haven’t been hot here either. But that’s to be expected in the current environment. In its most recent quarter, SQM said revenue slipped 38% year-over-year (YOY) to $1.84 billion. Net income came in 56% lower YOY to $479.9 million, as EPS crumbled 56% to $1.68 YOY.
However, a good amount of negativity has been priced in. Helping, Loop Capital recently raised its price target on SQM to $62, with a “hold” rating. Again, while we wait for the eventual recovery in SQM, we can sit back and collect its dividends.
Atlas Lithium (ATLX)
The last time I mentioned Atlas Lithium (NASDAQ:ATLX), it traded at around $14 on March 22. It’s still another one of the top lithium stocks to buy.
At the time, I noted:
“The company recently said it achieved full funding for its early revenue strategy to allow for the start of production later this year. Two, the company just said the construction of its modular dense media separation lithium processing plant remains on track for completion in Q2 2024.”
Today, the stock is up to $17.02. From here, if it can break above resistance at around $17.80, it could potentially test $20 next. Helping, Alliance Global Partners raised its price target on ATLX to $75 from $70 a share. Better, the company just signed a $30 million definitive agreement and offtake agreement with Mitsui & Co.
“Mitsui has entered into an offtake agreement for the future purchase of 15,000 tons of lithium concentrate from Phase 1 and 60,000 tons per year for five years from Phase 2 of Atlas Lithium’s soon to be producing Neves Project in Brazil’s Lithium Valley,” noted Seeking Alpha.
Frontier Lithium (LITOF)
There’s also Frontier Lithium (OTCMKTS:LITOF), a small $137 million company trading at just 60 cents.
This is a pre-production company that wants to become a major manufacturer of battery-quality lithium materials for EVs and battery supply chains in North America. At the moment, it’s developing the PAK Lithium Project, which reportedly holds one of North America’s highest-grade, large-tonnage, hard-rock lithium resources in the form of a rare low-iron spodumene, as noted in the company’s investor deck.
Most recently, the company signed a definitive agreement with Mitsubishi to establish a joint venture partnership for the PAK Lithium Project mine and planned lithium chemicals conversion facility. According to the press release, “This JV partnership delivers immediate and near-term financing to aggressively advance the first fully integrated lithium mining and processing operation in Ontario.”
“The Project remains largely unexplored; however, since 2013, the company has delineated two premium spodumene-bearing lithium deposits (PAK & Spark), located 2.3 Km apart. These deposits are supported by probable reserves of 22 million tonnes (Mt) averaging 1.55% lithium oxide (Li2O) and a measured and indicated resource of 26 Mt averaging 1.6% Li2O and inferred resource of 32.5 Mt averaging 1.4% Li2O.”
Sprott Lithium Miners ETF (LITP)
Or, you can always invest in an ETF for diversification at a low cost. For example, the Sprott Lithium Miners ETF (NASDAQ:LITP). With an expense ratio of 0.65%, the ETF has 49 holdings and trades for just under $10 a share.
It’s also the only pure play ETF with a focus on lithium mining companies. All of which should be well-positioned to benefit from explosive interest in clean energy and EVs. Also, while the ETF struggled for much of 2023, that’s to be expected when other lithium stocks are falling. However, with many names starting to recover, so is the LITP ETF. With a good deal of patience and growing demand for lithium, it will eventually come back even stronger.
Some of its top lithium stocks to buy holdings include Albemarle, Livent Corp. (NYSE:LTHM), Lithium Americas (NYSE:LAC), American Lithium (NASDAQ:AMLI) and Ganfeng Lithium (OTCMKTS:GNENF) to name a few. Last trading at just under $10, I’d like to see the LITP ETF retest $13 near term.
Amplify Lithium & Battery Technology ETF (BATT)
With an expense ratio of 0.59%, the Amplify Lithium & Battery Technology ETF (NYSEARCA:BATT) provides exposure to global companies that develop, produce and use lithium battery technology — all for less than $10 a share.
BATT ETF has 89 holdings, including Tesla (NASDAQ:TSLA), Albemarle, Sociedad Quimica and Panasonic (OTCMKTS:PCRFY). It is another hot ETF that could double, even triple, when lithium prices and related stocks start to push well off their low. While simplistic to say, it’s only a matter of time before lithium recovers and takes the BATT ETF along for the ride.
Last trading at $9.45, I’d like to see the BATT ETF run significantly higher. In fact, once the lithium boom gets hot again — which will again happen — the BATT ETF could retest its late 2021 high of $18.36 again, with a good deal of patience. Remember, with production being cut with low lithium prices, that’ll eventually backfire when green energy demand picks back up.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
