As the world transitions to electric vehicles (EVs) and clean energy, the demand for lithium, an essential component in rechargeable batteries, is expected to surge. While lithium prices have declined from their 2022 peak caused by overproduction and a temporary slowdown in EV sales, analysts predict that demand will outpace supply in the medium term, making lithium stocks attractive for long-term investors.
In this article, we will take a look at the best lithium stocks to buy, taking into account factors such as the company’s financial position, production capacity, growth prospects, and the technical aspects of the share price chart.
Here’s a quick overview of the best lithium stocks to buy in 2024:Best Lithium Stocks to Buy in 2024
A Closer Look at the Top Lithium Stocks to Buy
Here’s a closer look at why the names listed above are some of the top lithium stocks to invest in.
1. Albemarle – The World’s Top Lithium Producer
Albemarle ((NYSE: ALB) leads our list as it’s the largest lithium producer in the world. It’s operating a Chilean lithium mine in the country’s Salar de Atacama salt flats, alongside partner SQM, which is estimated to hold nearly a quarter of the world’s current supply of lithium.
Its lithium mine in Clayton Valley at Silver Peak, Nevada is recognized as the only producing lithium mine in North America. The Salar de Atacama and the Silver Peak lithium sites are based on brine. Lithium is also found in minerals, such as spodumene ore. In Australia, Albemarle holds a 49% share in the spodumene mine of Talison Lithium. At the same time, it also owns a spodumene mine in Kings Mountain, North Carolina, U.S., where it plans to start production by 2027.
Given the decline in lithium prices since 2022, it’s no surprise that the company has lost more than half of its market value in the past year. However, this gives investors the opportunity to buy the dip and position for a rebound in lithium prices. . The current price-to-earnings ratio (P/E) is 4.3% and this is expected to increase to 11.93% at the end of 2024.
According to the company’s most recent quarterly earnings, sales increased by more than 10%, driven by higher revenue in its Energy Storage business. We also like that the company pays dividends, giving investors a regular return. The current annual dividend yield stands at 1.24%.
Market Cap
Annual Dividend Yield
Revenue 3Q
EPS 3Q
Albermarle Corporation
$14.17 billion
1.24%
$2.31 billion
$2.74
2. Lithium Americas – Lithium Supply Deal With GM in Place
This pure-play lithium mining firm has signed a lithium supply deal with General Motors in January 2023, which includes an investment from the auto giant to develop the Thacker Pass mine in Nevada, the largest known source of lithium in the U.S., which is slated to begin production in the second half of 2026.
Under the agreement, GM pledged to invest $650 million in Lithium Americas (NYSE: LAC), the largest-ever investment by an automaker to produce battery raw materials. In October, the company split in two, with one company, Lithium Americas, focused on the Thacker Pass project, and Lithium Americas Argentina, focused on the company’s project in the South American country.
In its third-quarter earnings release, Lithium Americas said it began major earthworks at Thacker Pass, with major construction planned to begin in 2024. As of October 3, 2023, the pre-revenue company had approximately $275.5 million in cash and cash equivalents.
Market Cap
Annual Dividend Yield
Revenue
EPS 3Q
Lithium Americas
$713 million
N/A
N/A
$0.04
3. Arcadium Lithium -Livent, AllKem Form New Lithium Powerhouse
The combination between Livent Corporation and Australia’s Allkem closed earlier in 2024. The combined company, Arcadium Lithium (NYSE: ALTM), has a dual listing in the U.S. and Australia. The merger created the world’s third-biggest producer of lithium, with a combined revenue of $1.9 billion based on their 2022 financials.
Livent alone has been a top producer of high-purity lithium hydroxide, so the merger created a powerhouse in the industry and one of the best lithium battery stocks. Livent’s already solid customer base included BMW, Tesla, Panasonic and LG Chem. Livent has also been growing its production capacity in Argentina in recent years, where it has two brine-based projects. It also has facilities in China, the U.S. and the U.K..
Arcadium shares have fallen 25% since they began trading in January, which may provide a potential opportunity for investors to enter a position and benefit from future growth.
Market Cap
Annual Dividend Yield
Revenue 2022
EPS
Arcadium Lithium
$5.5 billion
N/A
$1.9 billion
N/A
4. Sociedad Quimica y Minera de Chile – High-Grade Lithium Brines
Sociedad Química y Minera de Chile (NYSE: SQM) stands out as another of the world’s largest producers of lithium compounds. Its well-regarded position in the industry stems from its high-grade lithium brines located in Chile’s Atacama Desert, a region renowned for its vast lithium reserves.
As with many other lithium companies, significantly lower average sales prices in lithium, impacted the Chilean lithium giant’s recent results although this has been partially offset by higher sales volumes due to solid fundamentals in long-term lithium demand from EV sales.
Furthermore, we like the fact that the company is continuing to expand in Chile, with its lithium carbonate capacity seen reaching 210,000 metric tons per year.
Taking a look at the SQM share price, the stock is down 54% in the past year, which should provide long-term investors with a solid entry point.
Market Cap
Annual Dividend Yield
Revenue 3Q
EPS 3Q
SQM
$12.8 billion
11.13 %
$1.84 billion
$1.68
5. Sigma Lithium – Developing a High-Grade Lithium Site in Brazil
Sigma Lithium (NASDAQ: SGML) is developing its 100%-owned Grota do Cirilo lithium project in Minas Gerais, Brazil, one of the largest and highest-grade hard rock lithium deposits in the world. The company said it expects to be a top 5 lithium producer globally once it achieves full-scale commercial production at the Grota do Cirilo Project.
If all goes to plan, Grota do Cirilo is expected to deliver a high-quality lithium concentrate, which Sigma believes will result in higher margins and operational efficiencies for its customers.
The shares have fallen nearly 30% over the past year in line with the decline in lithium prices in the global market. However, in the third quarter of 2023, the company recorded its first revenue and profit from the shipments of its main product, what it calls Triple Zero Green Lithium concentrate, and green by-products. Net income in the quarter totaled $36.4 million, or $0.33 per share, on sales of $96.9 million.
Given the Grota do Cirilo project is in phase 2 commissioning, we see the company as a long-term play that should benefit from the continued rise in demand for lithium.
Market Cap
Annual Dividend Yield
Revenue 3Q
EPS 3Q
Sigma Lithium
$2.45 billion
N/A
$96.9 million
$0.33
6. Rio Tinto – The All-Rounder Making a Lithium Play
While technically not a “lithium stock,” London-listed Anglo-Australian mining and metals group Rio Tinto (LON: RIO) could potentially be a strong player in the sector with its Rincon Lithium Project. The project is a large, undeveloped lithium-brine project located in what the company describes as the “heart of the ‘lithium triangle’ in Argentina.” When developed , the project could be a valuable source of high-quality lithium.
Rio Tinto was also previously working on the Jadar Project in Serbia. Still, licensing and governmental issues got in the way, and it is currently exploring options for the project’s future.
Rio Tinto is predominantly an iron ore miner, but it also produces various other raw materials, including aluminum, copper, and, of course, lithium. The company has a long track record of operating profitably and it has a very healthy 5.88% annual dividend yield, a plus for long-term holders. Its share price has gained 3.5% in the past year, and we believe its performance over the years and its move into lithium bodes well for its future.
Market Cap
Annual Dividend Yield
Revenue 1H 2023
EPS 1H 2023
Rio Tinto
$114 billion
5.88%
$26.7billion
$3.16
7. Piedmont Lithium – a Potential Major Player in the EV Supply Chain
With Piedmont’s share price falling 75% over the past year, investors may be wondering if the shares are oversold. That might well be the case, as we see it as a lithium stock to consider for its long-term potential.
The mining firm is currently developing two manufacturing plants, one in Tennessee and one in North Carolina, which it expects to be “one of the world’s most sustainable lithium hydroxide operations.” The plants should help meet a significant portion of U.S. lithium demand needs.
In the third quarter of 2023, Piedmont (NASDAQ: PLL) became a revenue generating lithium company after it made its first customer shipments under an agreement with its joint-venture operation, North American Lithium, and it reported positive adjusted net income of $16.9 million.
Piedmont should be considered another long-term lithium play. If it is able to execute on its vision, the potential payoff for investors entering a position at current levels could be significant.
Market Cap
Annual Dividend Yield
Revenue 1H 2023
EPS 1H 2023
Piedmont Lithium
$475.25 million
N/A
$47.13 million
$0.88
Why Invest in Lithium Stocks?
If you are not yet convinced about the merits of investing in lithium stocks, here are three compelling reasons to consider:
Growth Potential
Analysts, investors, and industry professionals all expect the demand for lithium to continue to rise significantly over the coming years, driven by the rapid adoption of EVs and the shift to clean energy.
According to Statista, the global demand for lithium in 2030 is expected to be 2.4 million metric tons of lithium carbonate equivalent, doubling the 2025 demand forecast. In addition, demand is expected to reach 3.8 million tons by 2035. Benchmark Mineral Intelligence expects it to soar to 11.2 million tons by 2050.
The substantial growth in demand presents a significant opportunity for lithium producers and market participants to invest in lithium stocks.
Diversification
Diversifying your portfolio is an essential part of reducing the potential risks. Investing in lithium stocks offers another avenue for diversification. As the sector and industries that need lithium continue to mature, lithium stocks can provide a hedge against potential downturns in other sectors.
Furthermore, with lithium holding a unique position as a critical component in developing various products and technologies, it is less susceptible to fluctuations.
Long-Term Opportunity
The gradual transition to cleaner energy is not just a temporary trend; it’s a fundamental shift that governments are pushing for. For example, in the U.S., the Inflation Reduction Act (IRA) provides tax incentives to clean energy industries. Many of these incentives include support for the lithium-ion battery (LiB) value chain for EVs and energy storage.
As a result of the shift to cleaner, more sustainable energy options, the demand for lithium is expected to remain strong for decades to come, making it a long-term investment opportunity.
Lithium demand has resulted in lithium stocks gaining significant attention. As a result, they are now an attractive investment option for many investors. However, selecting the most promising stocks can be complex. Here’s a how-to pick out potential winners: Before diving into individual stocks, it’s crucial first to understand how the lithium industry functions. It’s a good idea to understand who the key players are, their production capacities, and their geographic presence. In addition, examine the factors driving supply and demand. Learning about the market will give you a solid foundation for evaluating individual companies. Staying abreast of the latest news and developments will also give you an advantage when selecting lithium investments. Aim to keep track of advancements in battery technology, changes in government regulations, and emerging competitors. These factors may impact the demand for lithium and the competitive landscape, potentially making one stock more attractive than another Once you understand the market and have picked out some potential stocks you want to research further, take a look at their financial performance. Assess their revenue growth, profitability margins, and debt levels, as well as their ability to generate free cash flow, which indicates the capacity to fund future growth initiatives and return value to shareholders. Compare financial metrics against industry benchmarks to gauge their relative standing. Also, look into analyst expectations for future earnings performance. Part of the company’s outlook and growth will be based on its production capacity and expansion plans, which are critical factors for lithium companies. Look at their current production capabilities and their plans for future expansion. Some lithium companies don’t even produce revenue yet. Evaluate their plans for future capacity and how it will enable them to capture market share. Elsewhere, examine the company’s access to lithium resources, its ability to secure environmentally sound and cost-effective mining permits, and its technological expertise in lithium extraction and processing. Favor companies with a clear roadmap for increasing production to meet rising demand. Given the fact that lithium resources are located in various locations globally, geopolitical factors can impact production, costs, and supply chains. Therefore, diversifying your lithium stock portfolio across different regions can mitigate potential risks associated with political instability or resource nationalism. When picking lithium stocks to invest in, also look at the company’s management team and whether they have the experience and capability to drive growth and navigate the complexities of the lithium industry. Evaluate the track record of the company’s leadership, their experience in the sector, and ability to execute when needed. You can also look at previous interviews and comments to get an understanding of their leadership.How to Pick the Best Lithium Stocks to Invest in
Examine the Lithium Industry
Financial Performance
Evaluate Production Capacity and Expansion Plans
Consider Geographic Diversification
Management Expertise
Where to Get Lithium Stock Picks and Insights
To find more insights into Lithium stocks and make the analysis easier, we recommend checking out AltIndex, a subscription service for investors that uses artificial intelligence (AI).
Altindex provides stock picks, alerts, and insights using alternative data. This means that it analyzes social media and other websites, app downloads, customer satisfaction ratings, and other data points regarding a company.
It tracks this data over time, compares it to other companies, and then uses machine learning to generate investment insights. Stocks are given a ranking score out of 1 to 100, simplifying the analytical process that can often be very difficult for stock investors.
With over 10k members, AltIndex is a widely used and trusted service. It provides over 100,000 unique daily stock insights and alerts, and has a very impressive win rate of 75% from its AI stock picks.
You can try AltIndex’s Starter Plan for just $29 a month and receive stock picks directly to your email, as well as a range of other useful features.
Conclusion
As EVs and other battery-powered devices continue to gain popularity, the demand for critical ingredients, such as lithium, will soar. As a result, publicly listed companies in the sector will continue to attract attention from analysts and investors.
Therefore, there are a variety of fundamental reasons for investing in lithium stocks. Nevertheless, investors should always remember to consider the various factors impacting the market and the specific company before investing. Diversification is always a critical factor to consider in order to mitigate any potential risks.
While lithium prices have plummeted since their 2022 highs, dragging down lithium stock prices with them, investors may now have an optimal opportunity to pick up these shares at attractive valuations as a long-term investment.
References
https://www.statista.com/statistics/452025/projected-total-demand-for-lithium-globally/
https://www.cnbc.com/2023/06/03/the-rise-of-albemarle-the-worlds-largest-lithium-producer.html
https://sigmalithiumresources.com/grota-do-cirilo/
https://www.riotinto.com/en/operations/projects/jadar
https://www.riotinto.com/en/operations/projects/rincon
https://www.macrotrends.net/stocks/charts/ALB/albemarle/eps-earnings-per-share-diluted
https://www.macrotrends.net/stocks/charts/LTHM/livent/revenue
https://markets.ft.com/data/equities/tearsheet/summary?s=RIO:LSE
https://piedmontlithium.com/wp-content/uploads/ny20007452x3_ars_Piedmont_Bookmarked_Draft1.pdf
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