Lithium carbonate, the rare earth mineral needed to make lithium-ion batteries that power everything from electric vehicles to smartphones, had seen quite some price pressure since interest rates became elevated towards the end of 2022. Looking at lithium prices today, the story is a bit different. While lithium carbonate prices have fallen more than 48% over the past twelve months, they have experienced an uptick since the beginning of the year, increasing more than 16% on a year-to-date perspective. This is great news for the top lithium stocks to buy.
Given how the market has hammered lithium stocks lately, there are bound to be investing opportunities in the space. Here are the three lithium stocks to consider if you can only buy one.
Lithium Americas (LAC)
Lithium Americas (NYSE:LAC) is a lithium company that primarily mines lithium out of the Thacker Pass project in Nevada, the largest lithium deposit in the U.S. The Thacker project already has tremendous potential, with 16.1 million tons of battery-grade lithium carbonate equivalent (LCE) available for extraction.
With the Thacker Pass project having received a $650 million investment from General Motors (NYSE:GM), the project’s future role in supplying battery materials to power electric vehicles is undeniable. Moreover, the project will likely generate $1.2 billion in annual EBITDA, more than justifying LAC’s current enterprise value of $900 million.
A couple weeks ago, to add to Lithium Americas’ nearly $200 million of liquidity, the U.S. Department of Energy (DOE) approved a $2.26 billion loan, one of its largest investments in the mining industry to date.
LAC shares have risen around 4.4% on a year-to-date basis, and given the potentiality of the Thacker project, buying shares for a long-term hold could be a lucrative trade. Lithium and electric vehicles will be intrinsic to the future of transportation, and holding lucrative lithium projects like LAC will expose investors the long-term benefits.
Ganfeng Lithium (GNENF)
Ganfeng Lithium (OTCMKTS:GNENF) is a China-based company that happens to be one of the world’s largest producers of lithium products. The Chinese lithium producer has established strategic partnerships with several battery and EV manufacturers, including LG Chem, Volkswagen (OTCMKTS:VWAGY), BMW (OTCMKTS:BMWYY) and Tesla (NASDAQ:TSLA). Outside of mining for lithium in China, the company gained stakes in several lithium projects worldwide, including Caucharí-Olaroz in Argentina, Sonora in Mexico, Mt. Marion in Australia and Bacanora in the U.K.
Ganfeng Lithium struggled to grow earnings in 2023, as the China lithium market underwent a period of oversupply. The lithium producer eventually posted a 76% drop in profit for 2023. However, Ganfeng Lithium’s chairman did mention in early March that the lithium market was set for an upward price trend, and so far, it seems he is right.
Lithium prices are on the uptick, and while Ganfeng shares are trading down for the year, now may be a good time to consider an investment.
Sociedad Quimica y Minera de Chile (SQM)
Sociedad Quimica y Minera de Chile (NYSE:SQM) is the second-largest producer of lithium in the world, with operations in both Chile and Argentina. The company also operates one of the largest mines in the world at Salar de Atacama, Antofagasta, Chile. Salar de Atacama not only provides a low-cost, high-quality source of lithium brine but is one of the largest and richest salt flats in the world.
Unfortunately, the company also was not able to avoid the lithium market slump last year. Sociedad Quimica y Minera de Chile’s Q4 2023 earnings report missed Wall Street estimates due to lower year-over-year average sales prices on lithium carbonate. In its earnings presentation, however, SQM predicted the lithium market demand would rebound by 20% in 2024, which is current borne out in the lithium price data these days.
SQM is only trading at only 9.6x forward earnings. Investment bank Jefferies seems to think SQM’s potential is underappreciated. Analysts at Jefferies upgraded SQM to a “Buy” rating and raised their price target from $52.00 to $62.80, citing SQM’s competitive advantage in low cash cost for lithium production.
Currently down more than 17% YTD, SQM’s stock has room to move its way up to one of the top lithium stocks to buy.
On the date of publication, Tyrik Torres 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.