With accelerating demand for all things green, lithium prices may be bottoming out, creating opportunities for oversold lithium stocks. According to Pilbara Minerals (OTCMKTS:PILBF) CEO Dale Henderson, “doomsday headlines don’t reconcile with the broadly strong growth market,” as quoted by Mining.com. “Lithium demand from energy storage systems, such as those that back up solar arrays, is growing fast from a low base, and has the potential to be a sleeping giant for consumption.”
That, coupled with growing demand for electric vehicles will send lithium prices higher. According to Cox Automotive, U.S. EV sales were up 11.3% year-over-year in the second quarter, reaching 330,463. Also, as I noted the other day, “Those numbers will only improve moving forward, which will only increase the need for more lithium.”
That being said, investors should jump on, but not out lithium stocks on dips.
Albemarle (ALB)
The pullback in Albemarle (NYSE:ALB) is overdone. In fact, at $90.88, it’s actually a steal. While firms like HSBC, Citi, Baird and Wells Fargo are bearish on the stock, and while we don’t expect great second-quarter earnings on July 31, it’s safe to say the negativity has been priced in. Plus, while we wait for the eventual recovery, we can at least collect its 1.78% yield.
Helping, seven analysts rate the stock a buy, with an average price target of $126.65. The highest price target is $190 at the moment. For me, from its current oversold price of $90.88, I’d like to see it initially retest $140, with patience.
We also have to remember that if the Federal Reserve does cut interest rates, it could strengthen EV demand. All of which would strengthen the need for more lithium. In addition, the International Energy Agency still believes demand will soon outstrip supply.
Lithium Americas (LAC)
Weakness in Lithium Americas (NYSE:LAC) is also a buying opportunity. At $2.66, LAC is also a steal, especially with Thacker Pass construction expected this year.
As noted company CEO Jonathan Evans, “Thacker Pass is now the only large-scale integrated battery-quality lithium carbonate project in North America with a clear path to production. We have all construction permits in hand and our construction financing and execution readiness are substantially de-risked. We continue to advance detailed engineering and project planning ahead of making the final investment decision, which we expect to do later this year.”
That, coupled with stronger demand for all things green should be a powerful catalyst for LAC moving forward. That being said, I’d buy the excessive weakness in the LAC stock today and just wait out the chaos.
As Sir John Templeton has said, “The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”
iShares Lithium Miners and Producers ETF (ILIT)
Or, if you want to diversify with top lithium names, there’s the iShares Lithium Miners and Producers ETF (NASDAQ:ILIT).
The ETF invests in 44 lithium miners and producers with an expense ratio of 0.47%. That includes Arcadium Lithium (NYSE:ALTM), Pilbara Minerals, Albemarle, Lithium Americas, and Sigma Lithium (NASDAQ:SGML).
While its chart is just as ugly as most lithium stocks, it’s also a buy on excessive weakness. With EV sales gaining momentum with potential rate cuts, and demand for all things green, ETFs like the ILIT ETF could explode.
On the date of publication, Ian Cooper did not have (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
