Are These The Lithium Stocks To Buy Amid The EV Revolution?
The gradual shift toward electric vehicles has put lithium stocks onto investors’ radar. We’ve seen renewed interest in lithium stocks following Tesla’s Battery Day last week. Of course, the EV trend has been around for some time now. According to Statista, the demand for lithium will more than double over the next 5 years to 820,000 tons. And where is that lithium going? You’ve got it right. Much of the lithium will be for EV batteries.
Just yesterday, more big news came out involving Tesla. This time it triggered a more than 230% move in one lithium producer. Before the opening bells, news came out that Tesla signed a sales agreement with Piedmont Lithium Limited (PLL Stock Report), sending the Australian miner skyrocketing.
The agreement is a “5-year fixed-price binding agreement” deal whereby Piedmont will supply high-purity lithium ore to Tesla. According to Reuters, Tesla will receive roughly one-third of its requirement of 160,000 tons per year spodumene concentrate from Piedmont deposits in North Carolina. There’s also an option to extend the deal for another 5 years if the companies agree. But with one condition, Tesla and Piedmont must agree to start deliveries sometime between July 2022 and July 2023.
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Lithium Could Be The Best Pick-And-Shovel Play On Electric Vehicles
Automotive companies with technology elements- the electric vehicle stocks are among the market’s most beloved stocks these days. With the strong surge in stock prices of Tesla (TSLA Stock Report) and Nio (NIO Stock Report), investors are clearly hopeful about the prospect of the industry. The most direct market response we can expect is that investors will search for the top EV stocks to buy. But electric vehicle manufacturers are also seeing increasing competition and stretched valuations. Investors are therefore turning into some of the “pick and shovel” plays to ride along with the EV boom. For this reason, investors have been looking for top lithium stocks to buy for the batteries of the future.
After all, the shift toward clean energy vehicles is part of the evolution of the automotive market. The significant driver of the high demand for electric vehicles in China, the United States, and globally are making EV stocks at the forefront of gains. As a result, investors who seek to consider a new avenue for investments in the future can also look into the global automotive battery market.
Lithium Stocks Could Be The New Gainer Amid EV Revolution
The sale of electric vehicles may not outrun that of conventional combustion engines any time soon. But the truth is, we are increasingly seeing the shift towards EV due to environmental and sustainability reasons. The demand for lower emissions to combat global warming is getting more traction. In addition, more consumers are turning to vehicles that are fossil-fuel-free that would have no emission.
Investors who want to bet on a continued rise in lithium prices can gain exposure by trading the Global X Lithium & Battery Tech ETF (LIT Stock Report), which provides access to a portfolio of lithium and battery stocks. Alternatively, investing in lithium focused companies such as Albemarle Corporation (ALB Stock Report) could work too, as evidenced by its growing share prices in recent months.
More importantly, the growing cost-effectiveness of lithium-ion batteries is a major driver contributing to the rise of electric vehicles on the road. The improvement in battery tech and lower costs contributed to the rise of EV. Now, batteries are slowly entering the minds of investors. With that in mind, do you have this list of lithium stocks to buy during the last quarter of 2020?
Top Lithium Stocks To Watch This Week: Sociedad Quimica y Minera de Chile
First, up the list, Sociedad Quimica y Minera de Chile (SQM Stock Report) is one of the best lithium stocks to invest in. Now, many may have reservations given the foreign name. Perhaps Piedmont or Albemarle should have topped the list, you say. But let’s take a look at why many believe SQM is in a strong position to be able to meet the rising demand for lithium.
As the name implies, the company is based in Chile. Chile has the world’s largest lithium reserves. The country has 8.6 million metric tons of lithium, according to Statista.com. That amount is three times the reserves of the next country, Australia. It is perhaps a no brainer then, to suggest that Chilean companies or at least companies with strong Chilean presence are likely to be frontrunners of this lithium race.
Admittedly, SQM stock isn’t cheap. It is trading at a valuation of over 39 times trailing earnings. But it is cheaper than some of its peers. Besides, it has a stronger balance sheet with lower debt than even Albemarle. SQM has annual sales of $1.8 billion, putting it ahead of many rivals in the industry. The company has generated positive free cash flows every year for at least 10 years now. Given its strong track record, there is little doubt of the company’s ability to scale up and meet the rising demand for lithium batteries. With that in mind, is Sociedad Quimica y Minera the best lithium stock to buy and hold for the long term?
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Top Lithium Stocks To Watch This Week: Lithium Americas
Next up, another lithium stock that received a boost from Tesla’s Battery Day is Lithium Americas (LAC Stock Report). Investors were bracing for volatility among top lithium stocks after Musk voiced his intentions for exploring potential mining lithium from the Nevada desert, fearing that Tesla might not need them anymore. It turned out that Tesla’s Battery Day has not been as threatening as some might have imagined, and we will see why.
You see, the cloud of negativity quickly disappeared after analysts pointed out the “technology risk” in the way Musk plans to extract lithium from the Nevada clay. Many experts have voiced out their concerns, calling the underlying technology “speculative”.
Even in the case where it really works out, it will still be several years away from now, if ever, for Musk’s plan to materialize. In the meantime, Tesla still needs to depend on Lithium Americas for its batteries. Having said all these, it is not surprising to witness the volatility in LAC stock recently. Investors were probably betting that Tesla will no longer rely on Lithium Americas and other lithium suppliers. But turns out it was just a little scarecrow.
Top Lithium Stocks To Watch This Week: Livent
As you can see from its ticker symbol, Livent (LTHM Stock Report) is all about lithium. There wasn’t any specific news that moved the stock 6.23% higher this week. The jump in LTHM stock could simply be because of the Piedmont-Tesla deal which lifted all boats. Livent has had a wild ride since its IPO in 2018.
It traded above $16 a share during its early days. Unfortunately, since then it has stagnated, dropping to under $9. Currently, it has a market cap of just over $1 billion.
Of course, if you are an investor looking for a long term lithium exposure, there may be alternatives higher on the list. But if you are a trader looking to profit from the news of lithium and batteries, this is a relatively nimble stock. But then again, the company’s lithium portfolio will still benefit from the rising demand in the industry. The question is, will you be willing to handle the volatility?
