3 Lithium Stocks With the Potential to Deliver Significant Returns in the Next 5 Years


  • Lithium stocks dip as China’s demand falls, but long-term EV boom signals recovery & growth potential.
  • Albemarle Corporation (NYSE: ALB): Albemarle’s record sales and strategic restructuring signal a resilient long-term growth trajectory amidst market volatility.
  • Lithium Americas (NYSE: LAC): With a substantial boost from a $2.26 billion DOE loan, Lithium Americas is well-positioned to capitalize on the increasing domestic demand for lithium.
  • Sociedad Quimica y Minera (NYSE: SQM): SQM stands out due to its scale and strategic partnerships, including deals with LG Energy Solution and Ford, making it a compelling buy despite current geopolitical concerns.
lithium stocks - 3 Lithium Stocks With the Potential to Deliver Significant Returns in the Next 5 Years

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Lithium carbonate prices are taking a dive due to a significant decline in demand from China. After rising manyfold in 2022, the increasing stocks of the precious metal are leading to depressed prices, which has had a knock-on effect on lithium stocks. However, the long-term outlook of lithium stocks remains strong due to the strong uptick in demand for electric vehicles.

As a result, experts are forecasting that lithium carbonate prices might stabilize between $20,000 and $25,000 per metric ton from 2024 to 2027. This pricing point is seen as ideal for balancing industry expectations. Given these forecasts, although there are some near-term headwinds, the industry is poised for a recovery in 2024 as several key projects come online.

Investors must understand the dangers, though, if they choose to participate in the market. Growth is the key factor that astute investors must monitor. Falling lithium prices have a detrimental impact on the strong, growth-oriented lithium stocks featured. Additionally, in one instance, a quality pick is under pressure due to local geopolitical issues.

Top Lithium Stocks: Albemarle Corporation (ALB)

Albemarle (ALB) logo on a mobile phone screen
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Albemarle Corporation (NYSE:ALB) has a negative 42% one-year return. The lackluster performance reflects the challenges faced in the lithium market as

The latest financials highlight a troubling trend, with sales falling 10% in Q4’23, due to lower lithium market pricing, leading to a net loss of $618 million versus $1.13 billion in the same period last year.

Albemarle ended the year with record sales of $9.6 billion, the highest in company history. However, projections for the current fiscal year are muted within a range of $6.9 billion to $7.6 billion, reflecting the belief that issues within the lithium market will continue to impact operations this year.

To arrest the decline and deal with the new operating environment, the company is moving forward with a strategy to reorganize, aimed at unlocking more than $750 million in cash flow in the near term​​. Albemarle aims to save around $95 million annually, planning to prioritize and defer certain projects.

Albemarle has ambitious growth strategies that extend through 2027. Its new Lithium Mega-Flex Processing Facility in South Carolina is part of these expansion plans to build out capacity and take advantage of the long-term demand for lithium.

Lithium Americas (LAC)

smartphone with logo of Canadian company Lithium Americas Corp on screen
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Lithium Americas’ (NYSE:LAC) stock boasts a five-day return of 19% thanks to the U.S. Department of Energy agreeing to give the company a $2.26 billion loan for its Thacker Pass mine in Nevada, the country’s largest lithium deposit.

This loan is part of a larger American initiative to lessen dependence on China for its lithium supply. In addition to the loan, General Motors (NYSE:GM) has also provided $650 million to Lithium Americas, becoming its largest shareholder in the process.

The Thacker Pass mine will generate 40,000 metric tons of lithium carbonate annually, which could power up to 800,000 electric automobiles. At full capacity, the Thacker Pass project will generate 80,000 metric tons of lithium annually by 2028.

To fully focus on the project, the company split its operations into two independent entities. Each business segment has its own business focus. The primary motivation behind the restructuring was to concentrate on the Thacker mine.

The bottom line is that Lithium Americas is a long-term play. Shares will mirror the activities happening with the mine. However, the strategic importance of keeping domestic reserves of lithium up will ensure its place among the best lithium stocks to purchase.

Sociedad Quimica y Minera (SQM)

a pile of lithium. lithium stocks
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Sociedad Quimica y Minera (NYSE:SQM) is a Chilean chemical company facing the wrath of the markets due to domestic turmoil. The government is considering nationalizing the industry, which is why investors are taking the opportunity to dump the stock.

However, several analysts, including those from Citigroup (NYSE:C), view this situation as an overreaction. Considering its expansion plans and dominant role in the lithium industry, Citigroup sets an ambitious $85 target for lithium leader SQM, indicating a 70% upside from the Friday close of $50. This contrasts with the consensus “moderate buy” rating from analysts, who predict a more conservative 22% upside, placing the average price target at $61.

For me, the biggest reason to invest in SQM is its size, as it is one of the biggest lithium producers in the world. In addition, SQM is active on the deal-making front. It has a long-term arrangement with LG Energy Solution to deliver more than 100,000 metric tons of lithium carbonate and lithium hydroxide in 2023. Furthermore, Ford Motor Company (NYSE:F) and SQM have a long-term supply deal for lithium. In all, the Chilean business serves clients in 110 countries through operations in more than 20 countries.

Under these circumstances, SQM is one of the best lithium stocks to buy despite geopolitical risks, which I believe are already priced into SQM’s stock price.

On the publication date, Faizan Farooque did not have (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.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

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