If You Can Only Buy One Lithium Stock, It Better Be One of These 3 Names
For the next decade at least, lithium will be the most important natural resource driving the electric vehicle (EV) revolution. That’s because the vast majority of EVs utilize batteries powered by lithium, and different types of EV batteries aren’t expected to even start being deployed until 2028 at the earliest. Meanwhile, EV growth shows no sign of slowing as global EV sales soared 32% year-over-year in the first quarter of 2023. This has investors on the hunt for the best lithium stocks to buy.
Also noteworthy is that, for at least two reasons, governments are likely to keep heavily incentivizing consumers to buy EVs. First, they are looking to combat climate change. And secondly, powering EVs is one of the best ways to utilize the tremendous amount of electricity that’s being produced by the huge amounts of solar panels and wind turbines being deployed in most large countries. Given these realities, lithium miners are poised to deliver superb financial results over the next decade. Here are the three best lithium stocks to buy to profit from the trend at this point.
Albemarle (ALB)
Albemarle (NYSE:ALB) is one of the world’s largest miners of lithium. On June 14, Citigroup (NYSE:C) started coverage of ALB stock with a “buy” rating. The bank, which also named ALB as one of its “top picks,” is upbeat on the outlook of the EV sector.
In May, ALB announced an impressive deal with Ford (NYSE:F). Specifically, the lithium miner disclosed that, starting in 2026, it would “supply more than 100K metric tons of battery-grade lithium hydroxide for ~3M future Ford electric vehicle batteries.” The contract expires in 2031.
Also in May, UBS Group (NYSE:UBS) raised its rating on ALB to “buy” from “neutral” and increased its price target on the shares. As reasons for the upgrade, the bank cited significant increases in lithium prices and its belief that those prices will continue to climb for some time.
ALB stock has a very attractive forward price-earnings ratio of just 11.2.
Sociedad Química (SQM)
Like Albemarle, Sociedad Química (NYSE:SQM) is one of the world’s largest miners of lithium.
Also like ALB, SQM signed a long-term lithium supply deal with Ford last month, although the companies did not divulge details of the deal. However, the terms of the agreement are probably not very different than those of Albemarle, since Ford would probably want to treat the two lithium miners relatively equally in order to avoid alienating either of them.
Additionally, earlier in July, SQM reached a five-year deal to provide “more than 100K metric tons of battery-grade lithium carbonate and lithium hydroxide to South Korea’s LG Energy through 2029.”
The two deals illustrate the very large demand for SQM’s lithium from huge companies. With SQM poised to sign many more such agreements over the longer term, it’s one of the best lithium stocks to buy.
Livent (LTHM)
Like Albemarle and SQM, Livent (NYSE:LTHM) has signed long-term lithium supply deals with a number of huge firms. Specifically, LTHM has signed such agreements with Tesla (NASDAQ:TSLA) and BMW (OTCMKTS:BMWYY).
Additionally, the miner is working on significantly expanding its lithium production by boosting its output in Argentina and China. Livent’s merger with another lithium miner, Allkem Limited, will also greatly increase its capacity. Together the companies will become “one of the largest companies in the lithium industry,” Seeking Alpha columnist MJ Investing reported.
In May, Keybanc upgraded LTHM stock to “overweight” from “sector weight.” After conducting extensive research, the bank expects LTHM to benefit from increases in China’s lithium demand amid declining inventories in the Asian country.
On the date of publication, Larry Ramer did not hold (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.
