In a twist of fate, lithium stocks have had a tough spell, with many of the major players trading near yearly lows. This slump can be attributed to a mismatch in supply and demand. Anticipated demand for lithium-ion batteries, particularly in the electric vehicle (EV) market, was the impetus for producers scaling up production in early 2023. However, the EV revolution faced roadblocks, and the market ended up oversupplied. Additionally, the current economic climate dampened the market for wind and solar projects.
Could it be that lithium stocks, which have been performing poorly, are paradoxically on the brink of a turnaround? Despite the setbacks, there are numerous applications for lithium, including in energy storage and smartphones. While sentiment towards EVs has cooled off temporarily, it would be short-sighted to assume that the market won’t pick up momentum. This reversal could occur regardless of the prevailing economic and political landscape.
This presents an opportune moment for investors, and there are three company names worth considering.
Sociedad Química y Minera de Chile (SQM)
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Sociedad Quimica y Minera de Chile (NYSE:SQM) has been a testament to the idea that the worst may be over for lithium stocks. Over the last 12 months, SQM stock has plummeted by 49%. However, analysts project a price target of $67.77 for the stock, with half (8 out of 16) giving it a favorable Strong Buy rating.
Despite its low price, the stock is well below its previous highs set in 2022. The outlook for lithium production may be uncertain, but there is more stability in the case of this Chilean-based company, especially due to its exclusive deal with EV manufacturer BYD (OTCMKTS:BYDDF) for lithium contracts. This assurance stems from BYD recently surpassing Tesla (NASDAQ:TSLA) as the world’s largest EV seller.
Additionally, Sociedad Quimica y Minera de Chile is undervalued, with a forward P/E ratio of 5.6x, slightly lower than the 7.59x sector average of mining stocks. Moreover, the company offers a dividend with a current yield of 3.01%.
Albemarle (ALB)
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Mining stocks are challenging investments, particularly when the underlying commodity, like lithium, has had a lackluster year. However, Albemarle (NYSE:ALB) has shown resilience with its focus on shareholder value. Despite ALB stock trading 50% lower than its value just 12 months ago, Albemarle stands as a dividend aristocrat. The company has increased its dividend for 29 consecutive years.
Analysts have set a price target of $150.97 for Albemarle, representing a potential 27% gain from its current price. Even in the face of sustained pressure on lithium prices, the attractive dividend makes ALB stock an appealing option for investors.
Arcadium Lithium (ALTM)
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For those willing to take on more risk, Arcadium Lithium (NYSE:ALTM) should be on their radar. This new entity came into being through the merger of equals between Allkem and Livent. The combined company has become one of the largest integrated producers of lithium chemicals in the world, ranking as the third-largest lithium producer by volume.
Arcadium Lithium holds lithium mining assets across five continents and employs both hard-rock mining and brine extraction methods for its lithium products. The company’s focus on increasing demand in Argentina, known for high lithium concentrations and cost-effective mining, is a key strategic move. Although the company is yet to deliver its first earnings report, analysts are bullish, projecting a consensus price target of $7.95, representing a substantial 69% increase from its closing price on February 21.
Chris Markoch, a seasoned financial copywriter, has been observing the market for over five years and has been contributing to InvestorPlace since 2019.
