Battery stocks continue to take a beating due to multiple factors. Demand and prices for lithium continue to be very low. There is no current indication that will change in the immediate future. The electric vehicle (EV) industry continues to go through growing pains overall.
Tesla’s (NASDAQ:TSLA) fortunes tend to dictate the direction of the sector broadly. It continues to stumble, as recent earnings and revenue misses clearly show.
While many investors are heralding the troubles as the beginning of the end for EVs, just as many recognize there is an opportunity afoot. Bullish investors will find plenty to like from undervalued battery stocks in February.
Lithium Americas (LAC)
Lithium Americas (NYSE:LAC) has every chance to develop into one of the most important lithium stocks in the entire market. The company controls the development of the Thacker Pass mine in Nevada. Thacker Pass sits atop the largest known lithium deposit in the United States and one of the largest in the world.
The fact that Thacker Pass is such a large lithium deposit is of obvious strategic benefit to both the company and the United States. Lithium Americas has every chance to become a pivotal company with substantial global geopolitical importance.
Yet, the development of the Thacker Pass mine is still very premature. The company began construction at the site in 2023 and is not expected to begin producing lithium until 2026. So, it may come as no surprise its shares are still very inexpensive. At present, LAC shares trade for under $5. Yet, analysts believe those shares will be worth as much as $29 in the next 12 months. If demand dynamics change in 2024, as some expect, and lithium prices rise, investors are going to make a lot of money from lithium Americas in a short period of time.
Albemarle (ALB)
Albemarle (NYSE:ALB) may not sit atop the largest lithium mine in the United States, but it is the largest lithium firm in the world. It’s also an inexpensive stock at the moment. Lithium prices are in the basement, so it’s no surprise that Albemarle’s share price has tanked as well. The stock essentially went parabolic between late 2020 and late 2023.
The story of the stock has been the story of the development of the electric vehicle industry. It exploded and became part of the mainstream, pushing lithium prices to historic highs that ultimately collapsed due to oversupply.
Albemarle continues to grow even though the bottom has fallen out of lithium prices. Net sales reached $2.3 billion in the third quarter, up 10%. Albemarle received critical backing from the U.S. Department of Defense in the form of a $90 million grant. Prices are not nearly as strong as they were, but lithium prices are certain to return at some point. That’s true unless one believes the EV boom was a flash in the pan and the industry will fail overall. For all others, Albemarle is an easy choice at the moment.
QuantumScape (QS)
QuantumScape (NYSE:QS) continues to develop solid-state battery technology that promises to address major hurdles facing EVs. Solid-state batteries increase range, decrease charging times and are safer than current-generation EV batteries. QuantumScape is a leading firm in the space and that makes its stock one to watch.
QuantumScape is also heavily backed by Volkswagen (OTCMKTS:VWAGY), one of the largest automotive manufacturers globally. Volkswagen was an early investor in QuantumScape. That investment sent a strong signal to the market that the company may indeed have what it takes to produce solid-state batteries. More recently, it was news from Volkswagen that further cemented the notion in the minds of investors.
Volkswagen stated that QuantumScape’s A Sample batteries had significantly exceeded testing requirements. Several major companies are racing to commercialize solid-state battery technology first. Toyota Motor (NYSE:TM) is a strong competitor in that regard. The first-mover advantage will likely confer significant benefits. Thus, if QuantumScape wins the race its shares will skyrocket. The news from Volkswagen makes that a worthwhile bet to take.
On the date of publication, Alex Sirois 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.
