Lithium Americas (NYSE:LAC) experienced a 4.2% decline in Wednesday’s trading session after being downgraded by Deutsche Bank. The stock’s rating was lowered from Buy to Hold, accompanied by a revised price target of $7, significantly reduced from the previous $25. The downgrade was attributed to the company’s rich valuation following the recent spinoff of Lithium Argentina (NYSE:LAAC), as well as the elevated execution risk associated with the Thacker Pass project in Nevada.
Thacker Pass is a lithium asset located in the United States and is supported by a Tier 1 original equipment manufacturer (OEM), General Motors. Once the second tranche funding is secured in the coming months, General Motors is expected to acquire an approximately 20% stake in the project. Additionally, the U.S. Department of Energy has shown interest in the project, particularly in the context of the Inflation Reduction Act. However, Corrine Blanchard, an analyst at Deutsche Bank, believes that the execution risk associated with the early-stage asset development is high. As a result, Blanchard’s timeline for the Thacker Pass project is more conservative than that of the company’s management.
On the positive side, Blanchard maintains a Buy rating for Lithium Argentina (LAAC) and sets a price target of $11. She considers Lithium Argentina to be a compelling investment opportunity as it offers a de-risked lithium brine development in its Cauchari-Olaroz project.
The decline in Lithium Americas’ stock price is part of a broader trend affecting lithium stocks (LIT), with Albemarle (ALB) expected to close at its lowest level in over two years. Bank of America recently downgraded Albemarle, stating that lithium supplies continue to outpace demand.