Undervalued battery stocks present exciting opportunities for investors as the world transitions to clean energy sources and electric vehicles become increasingly prevalent. While some well-known companies in the battery industry receive significant attention, there are several lesser-known gems that are poised for growth and offer attractive entry points for savvy investors.
Some companies have established themselves as leaders in the industry, with cutting-edge technologies, robust supply chains, and strong partnerships with major automakers and energy companies. These factors contribute to their potential for long-term growth and is the reason they have made my list of undervalued battery stocks.
Furthermore, the European Union has identified lithium as a critical raw material crucial for its green and digital transition, particularly in the production of batteries for electric vehicles and energy storage systems. This gives these companies an additional growth angle.
So, having said that, here are three companies for investors to keep on their radars this month. I believe they represent the best value in the market.
Albemarle (ALB)
Albemarle (NYSE:ALB), the world’s largest lithium producer by market cap, plays a critical role in supplying lithium for electric vehicle batteries, among other applications.
For the upcoming year, Albemarle has introduced proactive measures to unlock more than $750 million in cash flow in the near term. These measures include optimizing its cost structure, which is expected to save approximately $95 million annually, and re-phasing its growth investments to improve financial flexibility.
ALB also anticipates significant growth in its Energy Storage segment, projecting net sales to range from $5.5 billion to $6.2 billion in scenarios of average lithium market prices of about $15 per kg LCE. Under higher price scenarios, these figures could increase to as much as $7.6 billion, with corresponding increases in adjusted EBITDA.
With all of these factors considered, I believe that ALB could be one of those undervalued lithium stocks for investors to buy.
Arcadium Lithium (ALTM)
Arcadium Lithium (NYSE:ALTM) is projecting significant growth for 2024, expecting a 40% increase in combined lithium hydroxide and lithium carbonate sales. Lower sales of spodumene concentrate somewhat offset this growth.
The company has outlined two potential revenue and EBITDA scenarios for 2024 based on different lithium market price assumptions. Arcadium Lithium projects revenue to be approximately $1.25 billion with an Adjusted EBITDA of around $420 million in the lower price scenario. In a higher price scenario, revenue could reach around $1.9 billion with an Adjusted EBITDA approaching $1 billion.
Analysts anticipate ALTM to take time to fully realize the equity from its merger from the start of the year. Thus, projections for its EPS are modest but steady in the near-term.
ALTM’s fundamentals are expected to reach an inflection point around FY2025. This is when a series of EPS increases are predicted, growing as much as 53.26% to 0.32. I think this makes ATLM undervalued relative to its EPS growth potential.
Panasonic (PCRFY)
Panasonic (OTCMKTS:PCRFY) plans upgraded versions of its electric vehicle battery cells, which are anticipated to offer improved capacity. Significantly, Panasonic has formed a partnership with NOVONIX to secure a sustainable supply of synthetic graphite. Synthetic graphite is a crucial component in lithium-ion batteries. This collaboration aims to reduce the carbon footprint of their battery production process.
Panasonic is also significantly expanding its battery production capabilities in North America. This move positions itself as a major player in the electric vehicle (EV) battery market. They plan to quadruple their battery production by 2030. They have a strong focus on producing 4680 battery cells, which are critical for the next generation of EVs.
One of the key things that most investors lack in their portfolios is international diversification. Although PCRFY’s main market is the U.S, its international operating segments and headquarters in Japan could make it a worthy consideration. It therefore ticks the box as a potentially undervalued battery stock while being in an international developed market.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
