Despite growing interest in the green energy revolution, lithium stocks faced challenges this year. Lithium is cruical for lithium-ion batteries, which power everything from electric vehicles to smartphones.

Yet, due to a supply glut and slowing demand, its price dropped by over 65% in 2024. Consequently, many sector companies have experienced declines in share prices.

Nonetheless, the long-term outlook for lithium remains promising. The International Energy Agency (IEA) projects that demand could increase up to 40x by 2040 compared to 2020. This presents a unique opportunity for investors to find value in lithium stocks, particularly those with strong fundamentals and attractive valuations. Savvy investors may find compelling prospects in this essential sector as the market stabilizes.

Here are three lithium stocks poised to thrive amid rising demand for sustainable technologies.

Albemarle (ALB)

We begin our discussion on lithium stocks with Albemarle (NYSE:ALB), a global leader in lithium production. In recent months, Albemarle saw a sharp revenue decline due to plummeting lithium prices, causing ALB stock to drop below its 2018 highs.

In the first quarter, the company reported revenue of $1.4 billion, reflecting a 47% year-over-year decline, primarily from lower lithium pricing. Net income also fell 47%, resulting in a loss of 8 cents per share, starkly contrasting earnings per share of $10.51 in the same quarter last year.

Despite these setbacks, Albemarle’s strong reserves, growth projects, and financial health offer a solid foundation for recovery. The company is focused on expanding production and improving operational efficiencies, achieving $90 million in productivity improvements in the first quarter alone. With key production plants in stable regions, Albemarle is positioned to navigate geopolitical tensions and supply chain challenges.

As a result, ALB stock declined 36% in 2024. Meanwhile, it offers a 1.8% dividend yield. Shares are trading at 36.3x forward earnings and 1.3x sales. Analysts project a potential 40% upside, with a 12-month median price target of $127.50.

Global X Lithium & Battery Tech ETF (LIT)

The Global X Lithium & Battery Tech ETF (NYSEARCA:LIT) is a top pick for investors seeking exposure to leading lithium stocks. This exchange-traded fund provides a diversified portfolio of companies across the entire lithium cycle, including mining, refining, battery production and EVs.

Launched in July 2010, LIT holds 40 stocks. The top 10 holdings comprise about 53% of its $1.2 billion net assets. Geographically, the ETF is well-balanced, with around 37% of its companies based in China, 24% in the U.S., 12% in Australia, 10% in South Korea, 10% in Japan.

The fund’s industry allocation includes electrical equipment (39%), chemicals (25%), metals and mining (14%), automobiles (9%), and semiconductors (6%). Leading names in the portfolio are  Albemarle, Tesla (NASDAQ:TSLA), Japanese electronics manufacturer TDK (OTCMKTS:TTDKY), Chinese EV seller BYD (OTCMKTS:BYDDF) and Australian resources company Mineral Resources (OTCMKTS:MALRY).

In 2024, LIT stock fell nearly 25%. Meanwhile, the fund offers a 1.6% dividend yield and comes with a 0.75% expense ratio. or $75 annually per $10,000 invested. Its trailing price-to-earnings (P/E) and price-to-book (P/B) ratios stand at 11.8x and 3.6x, respectively.

Despite the setback in recent months, investing in LIT around these levels could be a solid choice for capitalizing on the growing demand for lithium.

Sigma Lithium (SGML)

We conclude our discussion on lithium stocks with Sigma Lithium (NASDAQ:SGML), a Canadian company producing lithium concentrate primarily for the EV battery market. Operating in Brazil’s Lithium Valley, Sigma is a key player in the energy transition supply chain. It is known for its “Quintuple Zero Green Lithium,” which is a carbon neutral, socially and environmentally sustainable lithium concentrate.

In the first quarter, Sigma reported flat revenue of $37.4 million, reflecting a slight decline. However, net loss improved to $7 million, compared to a loss of $9.5 million in the previous quarter. Despite challenges, Sigma is now the world’s second-lowest cost producer of lithium concentrate, giving it a competitive advantage.

To drive growth, Sigma plans to ramp up concentrate production through infrastructure development. This aims to double its annual capacity to 520,000 metric tons by 2025. Additionally, a recently secured $22.4 million deferred letter of credit with Banco do Brasil (OTCMKTS:BDORY) further strengthens Sigma’s position, providing competitive vendor financing and enabling the company to expand its client base.

So far in 2024, SGML stock has declined 65%. Meanwhile, shares currently trade at 25.1x forward earnings and 7.3x trailing sales. Finally, analysts remain bullish with a 12-month median price target of $25 for Sigma Lithium, suggesting a 130% upside potential from current levels.

On the date of publication, Tezcan Gecgil did not have (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.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.