2020 became the year of electric vehicles (EVs) on Wall Street. Investors looking for the next Tesla (NASDAQ:TSLA) readily invested in businesses that had a “clean-energy” niche. As a result, the risk appetite in battery shares also increased significantly, pushing these stocks to record highs in recent weeks. Today’s article introduces seven lithium and battery stocks that could be poised for further growth in the coming quarters.
According to recent research conducted by members of the Argonne National Laboratory in Lemont, Illinois, “The currently commercialized lithium‐ion batteries have allowed for the creation of practical electric vehicles, simultaneously satisfying many stringent milestones in energy density, lifetime, safety, power, and cost requirements of the electric vehicle economy.”
Statista editor Willem Roper highlights, “New data shows how the demand for lithium-ion batteries has crept up over the last decade and will skyrocket as we enter the next.”
The new President Joe Biden administration is expected to support more clean energy initiatives. Thus, the future looks bright for the EV sector. Battery stocks could also reach new all-time highs in the year.
However, the current risk appetite makes such battery stocks volatile, especially in the short run. You should be ready to embrace swings in price, possibly with a downward during the ongoing earnings season.
With that information, here are seven lithium and battery Stocks that could energize portfolios:
- Albemarle (NYSE:ALB)
- Amplify Lithium & Battery Technology ETF (NYSEARCA:BATT)
- Global X Lithium & Battery Tech ETF (NYSEARCA:LIT)
- Lithium Americas (NYSE:LAC)
- Livent Corp (NYSE:LTHM)
- Plug Power (NASDAQ:PLUG)
- Switchback Energy Acquisition (NYSE:SBE)
Battery Stocks: Albemarle (ALB)
52-Week Range: $48.89 – $188.35
Dividend Yield: 0.95%
1-Year Change In Price: Up 90%
North Carolina-headquartered Albemarle has been on investors’ watchlist in recent months. It is the industry leader in lithium, which is used to make electric vehicle (EV) batteries. The group also produces specialty chemicals used in products manufactured by pharmaceutical firm, agricultural companies, water treatment businesses, electronics products manufacturers, and refineries.
As a result of the Street’s love for any company that is EV-related, ALB stock’s price nearly doubled in the past 12 months. Now Wall Street is betting that the new President Joe Biden administration will take environmentally friendly steps that could provide further tailwinds for shares like ALB.
According to the most recent quarterly results, net sales were $747 million, down by 15% YoY. Net income came at $98.3 million, a decline of 36.6%. Adjusted diluted EPS of $1.09 was down 28.8% YoY.
Management noted, “Our long-term strategy and capital allocation priorities remain the same: to invest in Lithium growth using cash flows from our entire enterprise, while maintaining our dividend and investment grade credit rating.”
ALB stock’s forward price-earnings and price-sales ratios are 38x and 5.35x, respectively. As a result of the recent run-up in price, the valuation metrics are on the froth side. Potential investors could consider investing when it’s under $160.
Amplify Lithium & Battery Technology ETF (BATT)
52-Week Range: $5.91 – $18.80
Dividend Yield: 0.4%
1-Year Change In Price: Up 74%
Expense Ratio: 0.59%, or $59 per $10,000 invested annually
Our next discussion centers around an exchange-traded fund (ETF), namely the Amplify Lithium & Battery Technology ETF. The fund’s focus is users or manufacturers of lithium battery technologies. Such businesses might provide battery materials or storage solutions. EVs that rely on lithium batteries are also among the holdings.
BATT, which tracks the EQM Lithium & Battery Technology Index, holds 72 stocks. As far as sectors are concerned, Materials (49.3%), Automobiles & Components (20.9%), and Capital Goods (14.5%) lead the list.
Over 4o% of its net assets of $78 million are in the 10 ten names. EV darling Tesla, China-based battery systems business Contemporary Amperex Technology, EV group Byd (OTCMKTS:BYDDY), and leading global resources name BHP (NYSE:BHP) and LG Chemical, the largest South Korean chemical company, make up the top names in the roster.
2021 has started on a solid footing for investors in BATT. In late January, it hit a record high, and is up about 12% since the start of the new year. Potential investors could consider buying into the declines.
Global X Lithium & Battery Tech ETF (LIT)
52-Week Range: $17.83 – $72.95
Dividend Yield: 0.4%
1-Year Change In Price: Up 128%
Expense Ratio: 0.75%
Our next choice today is also an ETF, i.e, the Global X Lithium & Battery Tech ETF, which gives exposure to firms that focus on lithium worldwide. They might range from mining and refining lithium to manufacturing lithium batteries.
LIT, which tracks the Solactive Global Lithium Index, has 40 holdings. This fund’s net assets stand close to $2.9 billion. From a geographic standpoint, China-based companies top the list with 44%, followed by the U.S. (22%), South Korea (12), and Japan (6.7%), among others.
Big names Albemarle, Ganfeng Lithium, LG Chemical, Tesla, and Samsung comprise close to 35% of the fund. Since the start of 2021, the fund is up over 9% and hit a record high in early January.
Given the recent choppiness in broader markets, some investors might decide to take money off the table. But the long-term prospects for the industry are solid.
Lithium Americas (LAC)
52-Week Range: $1.92 – $28.75
Dividend Yield: N/A
1-Year Change In Price: Up 408%
Canada-based resources group Lithium Americas is a development-stage company with projects in Argentina and Nevada. It mainly operates on two projects, including the Cauchari-Olaroz Lithium Project in Argentina, and the Thacker Pass Lithium Project in Nevada, which Lithium Americas owns 100%.
Reuters has recently reported, “Lithium Americas has said it plans to spend $400 million on the first phase of its Thacker Pass project with output of 20,000 [metric tons] of lithium annually. The mine is expected to open by 2023.” Following the governmental approval, investors are hopeful Lithium Americas will be able to find a partner for the project.
Shares in the lithium miner have benefited immensely from the surge in lithium demand in the past several months. In mid-November, Lithium Americas announced Q3 results. A net loss of $6.5 million, translated into a loss of 7 cents per share. Cash and equivalents were $71.9 million.
The company is not producing lithium at scale today. Therefore, the current price might reflect optimism around EV industry trends. Put another way, the future growth story of the shares depends on the company producing its own lithium. As a result, LAC stock is likely to be volatile. I believe a potential decline toward $15 would improve the risk/return profile.
Livent (LTHM)
52-week range: $3.95 – $23.99
Dividend yield: N/A
1-year price change: Up 103%
Philadelphia-based Livent is a lithium technology company that supplies products for a range of industries. It was spun off from agricultural sciences group FMC (NYSE:FMC) and started trading in October 2018. Livent has manufacturing sites in the U.S., U.K., India, China and Argentina.
According to the most recent financial results, revenue was $72.6 million, a YoY decline of 25.6%. GAAP net loss came at $11.8 million. A year ago, the income had been $18 million. GAAP net loss per diluted share was 8 cents. Cash and equivalents stood at $14.8, down by 36.5%.
CEO Paul Graves underscored the importance of the group’s supply agreement with Tesla. He said, “We continue to see evidence that demand for lithium compounds will accelerate in 2021 and beyond, with growing support for electrification from OEMs, governments and consumers, despite significant disruptions in 2020… Our ongoing partnership with Tesla and our agreement to invest in New Nemaska are examples of this.”
The stock’s forward P/E and P/S ratios are 90.91 and 9.37, meaning a frothy valuation. Given how far LTHM stock has gone up in recent months, short-term weakness could be around the corner, especially during this volatile earnings season. Potential investors may find a better entry-pint around $15 or even below.
Plug Power (PLUG)
52-Week Range: $2.53 – $75.49
Dividend Yield: N/A
1-Year Change In Price: Up 1,650%
Liquid hydrogen provider Plug Power started operation in 1997, but 2020 became the year investors fell in love with PLUG shares. The group specializes in hydrogen fuel cells, regarded as a viable alternative to lead-acid batteries. Plug Power’s products provides fuel for small (warehouse forklifts) and large (delivery vans and airport safety equipment) vehicles.
In recent days, management said it would have a joint-venture with the France-based automaker Renault (OTCMKTS:RNLSY), establishing “in France state-of-the-art innovation and manufacturing capabilities for hydrogen fuel cell systems and their integration in vehicles.”
Q3 results announced in November showed gross billings of $125 million, an increase of 106% YOY and 73.4% sequentially. The number marked “the highest quarter in the company’s 22-year history.” The Street was also pleased to see an increase in the number of fuel cell units deployed, i.e., 4,100 fuel cell systems and 13 hydrogen fueling stations. Plug Power increased the 2020 gross billings guidance to $325 million to $330 million from $310 million.
In the long run, we are likely to see PLUG stock continue to hit new record highs. However, there is likely to be volatility with a downward bias in the shares soon. Potential investors could consider buying around $60 or even below.
Switchback Energy Acquisition (SBE)
52-Week Range: $9.38 – $49.48
Dividend Yield: N/A
1-Year Change In Price: Up 308%
On Sept. 24, 2020, Switchback Energy Acquisition, a publicly traded special purpose acquisition company (SPAC), and ChargePoint, a privately-held EV charging business at the time, said they would be merging. Since then SBE stock has turbocharged investor portfolios.
In late September, SBE stock was around $12. Now the shares are over $40. Put another way,$1,000 invested in the shares back then would be around $3,000 today.
As InvestorPlace.com contributor Faizan Farooque says, ChargePoint operates the largest EV charging station network in the world. He wrote, “ChargePoint projects compounded annual growth rates of 60% over the next seven years, exceeding $2 billion in revenue by 2027.”
Potential investors could regard any dip in price as a good opportunity to buy into SBE shares.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
