Lithium is a key component of electric vehicle (EV) batteries, which have surged in demand in the past few years, causing some of the best battery stocks to reach record highs in late 2022. Lithium carbonate prices have fallen more than 62% over the past twelve months, but prices seem to be back on the rise in 2024. According to Koyfin, lithium carbonate prices have risen nearly 20% on a year-to-date perspective. The upward price pressure is partially due to a strengthening market in China, and is benefiting certain favorite lithium stocks.
Still, lithium stocks are trading at 12-month lows, meaning some of them are approaching an enticing price territory. Wall Street, in particular, has shown love to some of these lithium names. Below are three of Wall Street’s favorite lithium stocks.
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’s financials have struggled in recent quarters. In particular, the company has been hit by an oversupply of lithium in China. The lithium producer recently forecasted a 70-80% drop in profit for 2023. However, Ganfeng Lithium’s chairman said the market is set for an upward price trend, particularly as it stabilizes. Ganfeng is currently trading at 8.1x forward earnings, making it immensely undervalued The company also has a solid “Buy” rating from a number of Wall Street analysts. As EV demand picks up again, holding a stock like Ganfeng Lithium could prove to be lucrative.
Albemarle (ALB)
Albemarle (NYSE:ALB) continues to be the world’s largest lithium producer boasting a diversified portfolio of lithium assets. It includes brine operations in Chile and Argentina, hard rock mines in Australia and joint ventures in China and the U.S. Also, the company produces bromine and catalysts. This provides stable cash flows and helps offset the volatility in the lithium market.
ALB generated over $7 billion in revenue in 2022 due to elevated lithium prices. Unfortunately, in 2023, the pressure of falling lithium prices have decreased both top-line and bottom-line figures. In its Q4’2023 earnings report, fourth quarter revenue declined by 10.1%, while EPS declined by 160%. While these estimates came above what Wall Street was predicting, markets still haven’t been kind to ALB shares. The lithium producer’s stock price has fallen more than 15% since the start of the year.
Again, this is attributed to pessimistic investor sentiment about the direction of lithium prices. Interest rates will likely begin to fall in the latter half of this year, which could incite demand for new vehicles and lead to a rebound in lithium prices.
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 has struggled due to the lithium market slump. 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 could give some relief to skeptical investors.
The company also a solid “Buy” rating from a number of Wall Street analysts, and since the SQM is trading at only 10.0x forward earnings, the lithium producer could be a good buy now.
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.