These 2 Lithium Stocks Could Blast Higher by Over 40%, Says Analyst

Modern society has a strong desire for metals. Smart investors can take advantage of this for their profits. There is a wide variety of metals, from less-known rare elements like scandium and ytrium to the crucial component of every electronic device’s lithium battery, all of which are well-known. Lithium has been growing in value as laptops, ipads, and smartphones, with lithium-ion batteries, have proliferated, but in recent years the expansion of electric vehicles – and their far larger battery packs – has pushed the price of lithium sky-high.

Investors see this as a great opportunity, especially for lithium mining and lithium processing.

In a report from B. Riley Securities, analyst Matthew Key lays out the current status and path forward for the lithium industry: “Lithium has arguably been the best-performing commodity since the start of 2021, with current pricing for carbonate and hydroxide at $74,000/Mt and $80,500/Mt, respectively, primarily from battery demand for electric vehicles. We believe that the robust outlook for electric vehicle sales will allow for strong pricing in the near-term …”

Key’s description shows why now is the right time for investors to consider lithium, as a portfolio option. So let’s take a look at two lithium stocks that the analyst has given Buy ratings along with double-digit upside potential – on the order of 40% or more. In fact, Key’s view is no outlier. Running the tickers through TipRanks’ database, we found out that each boasts a “Strong Buy” consensus rating from the broader analyst community.

Lithium Americas (LAC)

Lithium Americas has two major lithium mining-processing projects in the works. It is currently developing the Cauchari-Olaroz mine, in northern Argentina, as well as the Thacker pass mine, in Nevada. Thacker Pass is potentially North America’s best lithium mine, with the largest known lithium reserves in the US. Lithium Americas anticipates that the two projects will produce approximately 100,000 tonnes of usable lithium each year.

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The company is currently in the development stage, with both projects moving towards completion and production. The company released its 3Q22 report on October 27. It reported that the Cauchari-Olaroz project was progressing as expected. A schedule update is also planned for the next quarter.

Lithium Americas, which is focusing on Thacker Pass, reported that 100 tonnes of ore had been shipped from the mine by September to be used in the production of product samples for potential customers and partners. The feasibility study, which is required before the mine opens, will be completed in 1Q23.

Lithium Americas is pre-revenue but is in a good financial position. The company had $392 million in cash and liquid assets as well as $75 million of available credit.

Checking in with B. Riley’s Key, we find that he is bullish on Lithium Americas, saying of the stock: “LAC continues to be one of our favorite names in our coverage group, and we believe the completion of Cauchari in early 2023 will serve as a major catalyst for the stock. Importantly, the increase in near-term carbonate pricing benefited the earnings potential of Cauchari considerably, and we are now estimating $332M in EBITDA for 2023E and $385M for 2024E.”

So it is not surprising that Key rates LAC has been rated a Buy. Key’s $41 price target places the upside potential at 48%. (To watch Key’s track record, click here)

It’s clear from the consensus rating, a Strong Buy supported by 5 Buy ratings out of 6 analyst reviews, that Wall Street is bullish on this lithium company. Upside is the shares trading at $26.43 while their average price target of $35.96 suggests a gain 36% over the coming year. (See LAC stock forecast at TipRanks)

Piedmont Lithium (PLL)

The next stock we’ll look at is Piedmont Lithium, a lithium mining and processing firm which, like LAC above, is still in the development process. The company’s goal is to turn the US into a major player in the global lithium supply chain. It’s a realistic goal; the US has approximately 17% of the world’s proven lithium reserves, and with current US production averaging only 2% of current supply, there is plenty of room for expansion here.

Piedmont is attempting to bring North Carolina mining assets online. The company’s main activities are in the Carolina Tin Spodumenebel, which is not far from Charlotte. The company has 1,100 acres in the area and plans to begin construction activities by 2024. Spodumene concentrate production is expected to start in 2026. It is aiming for 30,000 tonnes annually at its full production capability.

The company’s other major project is located in Tennessee, where the company has selected a site for a 30,000 ton capacity lithium hydroxide plant, with production targeted for 2025. The company’s Tennessee lithium project has recently been selected by the US government to receive a $141.7 million grant from the US Department of Energy, as part of the Biden Administration’s recent infrastructure law.

Outside of the US, Piedmont has partnerships with lithium mining projects in Quebec, at the North American Lithium (NAL) project in Val d’Or, and in Ghana, in the Ewoyaa project. Piedmont made investments in these projects in 2021 and anticipates that it will benefit from 168,000 tonnes annual production in Quebec of spodumene concentrate starting in 2023 and 30.1 million tons Li2O reserves at Ewoyaa’s mine. Although the Quebec and Ghana projects draw on smaller resources than Piedmont’s in the Carolina, they will likely go online sooner.

Analyst Matthew Key recently bumped up his price target on Piedmont Lithium’s stock, and wrote of his decision: “Our PT for Piedmont increased for two primary reasons. First, the increase in long-term hydroxide prices from $16,000/Mt to $18,000/Mt was highly accretive to Piedmont’s hydroxide projects in Carolina and Tennessee. The adjustment added approximately $338M to the NAV values of both assets. In addition, the increase in long-term spodumene prices from $900/Mt to $1,200/Mt also benefited the NAV of the company’s two spodumene assets.”

Key rates the shares as a Buy and sets a new price target at $108, which indicates that there is room for 75% upside potential.

The company is pre-production and there have been 4 analyst reviews. All of them are positive. This makes the Strong Buy consensus rating unanimous. The shares are priced at $61.56 with a $108.75 average price target. This suggests that there will be a gain in value of 77% over the next twelve months. (See PLL stock forecast at TipRanks)

To find good ideas for lithium stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: These analysts’ opinions are theirs alone. This content is for informational purposes only. Before making any investment, it is important to conduct your own analysis.