Weakness is quickly becoming an opportunity in lithium stocks. For one, most are now technically oversold. Two, with accelerating demand and lithium prices, related stocks could easily bounce back. Also, thanks to growing demand, companies like Exxon Mobil (NYSE: XOM) are jumping into the lithium boom.
In fact, XOM just started actively exploring the market and recently bought drilling rights to 120,000 gross acres in the Smackover formation of southern Arkansas.
But wait, there’s more.
According to BNAmericas, “Chilean producer SQM is confident that the boom in electric vehicle (EV) sales will be a crucial driver of global demand for the soft white metal. Electric vehicle sales worldwide are expected to rise by around 30% this year, while lithium demand will increase 20%, the company forecast in its 1H23 results report.”
Those catalysts alone could send oversold lithium stocks to higher highs.
Albemarle (ALB)
Albemarle (NYSE:ALB) has become ridiculously oversold. However, after catching strong support at $180 and getting just a bit over-extended on relative strength (RSI), MACD, and Williams’ %R, the ALB stock is starting to pivot higher. In fact, I’d like to see it initially test $214.48 resistance. Even better, as we wait for ALB to recover, we can collect its dividend yield of 0.85%.
Plus, the company just crushed earnings estimates. Not only did it beat second-quarter adjusted earnings estimates, but it also raised full-year guidance. Q2 net income came in at $650 million, or $5.52 a share, from $406.8 million, or $3.46 per share. Net sales jumped about 60% to $2.37 billion from $1.48 billion year-over-year.
With guidance, the company raised its full-year numbers. It now expects to see net sales growth of about 40% to 55% and adjusted EBITDA to improve another 10% to 25% from 2022. Analysts like the ALB stock here, too, with RBC Capital, Bank of America, Mizuho and Credit Suisse all raising their price targets.
Livent (LTHM)
Livent (NYSE:LTHM) has also become oversold. Sitting at major support dating back to mid-2022, LTHM is also over-extended on RSI, MACD, and Williams’ %R. In fact, the last time LTHM became this technically oversold, it ran from about $20 to $29. Recent earnings were okay, too.
While second-quarter revenue of $236 million was down quarter-over-quarter with lithium price declines — it was still up 8% year-over-year. Its GAAP net income of $90.2 million was also down about 22% for the quarter but was still up by about 50% compared to last year.
We also have to consider that LTHM is merging with Allkem (OTCMKTS:OROCF), which is expected to close by the end of the year and help create a substantial lithium producer. Better, Livent has an 11-year supply agreement with Ford Motor (NYSE:F) as the auto company looks to expand its electric vehicle production numbers.
Global X Lithium & Battery Tech ETF (LIT)
Or, if you just want to diversify in an oversold yet hot lithium sector, you can always buy the Global X Lithium & Battery Tech ETF (NYSEARCA:LIT).
With an expense ratio of 0.75%, the ETF invests in the complete lithium cycle. Everything from mining and refining the metal through battery production. Some of its top holdings include Albemarle, TDK (OTCMKTS:TTDKY), Panasonic (OTCMKTS:PCRFY), BYD (OTCMKTS:BYDDF), and Tesla (NASDAQ:TSLA).
The LIT ETF is also technically oversold at support dating back to earlier this year. It’s also over-extended on RSI, MACD, and Williams’ %R. From a current price of $57.74, I’d like to see it test prior resistance around $67.50 again soon.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
