Lithium stocks have been among the worst performers in 2023 and into 2024. As of this writing, investors are seeing many of the stocks of the big name lithium producers trading near 52-week lows. The issue is one of supply and demand. Lithium producers scaled production in early 2023 on anticipated demand for lithium-ion batteries, particularly in the electric vehicle (EV) market.
But the EV revolution has hit a snag for several reasons. And that’s left that market oversupplied. Plus, a fickle economy has collapsed the market for wind and solar projects.
But have lithium stocks become so bad they’re finally getting good?
This may be a case where demand delayed is not the same as demand denied. There are still many applications for lithium including in energy storage applications and smartphones. And while sentiment has cooled on EVs, it would be foolish to say the market won’t pick up. And that reversal could happen no matter what happens in the current election year.
That makes lithium stocks more attractive, and here are three names for investors to consider.
Sociedad Química y Minera de Chile (SQM)
Sociedad Quimica y Minera de Chile (NYSE:SQM) is proving the narrative that lithium stocks may be getting so bad they’re good. SQM stock is down 49% in the last 12 months. But analysts have a $67.77 consensus price target on the stock with half (8 out of 16) giving the stock a Strong Buy rating.
Even at that price, the stock is far below the lofty highs it set in 2022. That could reflect the uncertain outlook for lithium production. However, in the case of the Chilean-based company there could be more certainty in that area.
That comes from the company’s exclusive deal with EV maker BYD (OTCMKTS:BYDDF) for lithium contracts. By itself that’s not unusual. Several EV makers are forging alliances to ensure uninterrupted supply chains. But analysts are undoubtedly taking into account that BYD recently passed Tesla (NASDAQ:TSLA) as the world’s largest seller of EVs.
Sociedad Quimica y Minera de Chile is also objectively undervalued. It trades at a forward P/E ratio of 5.6x which is slightly lower than the 7.59x sector average of stocks in the mining sector. The company also issues a dividend that currently yields 3.01%.
Albemarle (ALB)
Mining stocks are challenging to buy for many reasons. They become even more challenging when the underlying commodity has a year like lithium did last year. At times like these, it’s helpful to find companies like Albemarle (NYSE:ALB) which have a proven track record of focusing on shareholder value.
Ian Bezek explained the geopolitical events that spooked investors away from lithium miners with exposure to Chile. And ALB stock is trading 50% lower than it was just 12 months ago. But with Albemarle investors are buying a dividend aristocrat. The company has increased its dividend for 29 consecutive years.
Analysts tag Albemarle with a $150.97 price target which would be a nice 27% gain from its current price. But even if lithium prices remain under pressure, that solid dividend is one reason to buy ALB stock.
Arcadium Lithium (ALTM)
If you’re willing to accept more risk, Arcadium Lithium (NYSE:ALTM) is one to put on your radar. This is a new company that was created as a result of the merger of equals between Allkem and Livent. The new company will be one of the largest integrated producers of lithium chemicals in the world. In fact, Arcadium Lithium is already the world’s third-largest lithium producer by volume.
The company has lithium mining assets on five continents and uses both hard-rock mining and brine extraction methodologies in producing its lithium products. One of the key countries in which the company plans to increase demand is Argentina. Not only is this area known for high lithium concentrations, but it also offers significant cost advantages in mining and production.
The new company has yet to deliver its first earnings report, but analysts are bullish on the stock. The stock has a consensus price target of $7.95 which is 69% higher than its closing price on February 21. And 9 out of 16 analysts give the stock a Strong Buy rating.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
