The demand for lithium is strong today, but it will be even stronger in the years ahead. Why? It all comes down to the introduction of electric vehicles (EVs).
Last year, 1.2 million EVs were sold around the world, and that’s expected to increase 33% to 1.6 million this year. If just 400,000 more units are sold in 2019, global sales will tally in at two million.
This growth is impressive in the near term, but the big picture is even more promising. In fact, if all goes as planned, the annual number of EV units sold could hit 25 million by 2025.
A lot is riding on the ability of the automakers to keep up with demand. That why most have announced plans to greatly expand their EV offerings in the coming years. Porsche has stated that 50% of its vehicles will be electric. And by 2025, BMW has said that it will offer 25 cars that are either hybrid or EVs, and 12 of them will be fully electric.
Considering lithium is the main metal in the power source behind EVs (lithium-ion batteries), it’s not hard to like the lithium-producing stocks. Their upside potential is nearly endless!
FMC Leads the Lithium Producers
One of my favorite lithium-producing companies is FMC Corp (NYSE:FMC). It’s one of the Big Three global producers and is a stock I’ve been following for more than a decade.
FMC has experienced several strong bull markets and two bear markets in that time. Its most recent period of weakness occurred early this year not long after the stock hit an all-time in January. It was the perfect storm — FMC had rallied to a valuation that was ripe for a normal and healthy pullback. Unfortunately, at the same time a couple of research firms released bearish reports on lithium’s supply/demand curve.
The shares fell into that second bear market that I mentioned, but they found a bottom in March and have been slowly moving higher since. And my long-term outlook on both it and the lithium sector as a whole remain as bullish as ever.
I believe that a move to $100 and possibly beyond is a realistic target in the next 12 months. Therefore, I view any near-term pullbacks as buying opportunities for investors with long-term strategies.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.
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