Investors watched electric vehicle (EV) stocks rise monumentally through the pandemic only to taper off as the realities facing the sector continue to take shape. Slump considered, it’s fair to conclude that electric vehicles are here to stay — as well as the cheap lithium stocks whose products are key to EV manufacturing.
In fact, a recent statistic points to the fact that EVs now comprise more than 5% of the automotive market share. That’s an important number because to many, it represents something of a tipping point. That means EVs are likely to be a permanent fixture in the automotive industry regardless of individual opinion.
That brings us to lithium, a dominant material in the manufacturing of electric vehicles. Given that EVs are here to stay, lithium stocks are pick-and-shovel investments worth considering. Let’s jump into the equities in the sector that have upside and strong market positions.
|Lithium Americas Company
|Sociedad Quimica y Minera de Chile
Cheap Lithium Stocks: Lithium Americas Company (LAC)
Lithium Americas Company (NYSE:LAC) is a Canadian company with mining operations in the United States and Argentina. The best way to describe LAC stock as an investment is to say it represents a company on the cusp of production.
The firm’s operations in Argentina include two sites. The more developed of the two, Caucharí-Olaroz, is 90% complete. That means the company is now shifting from construction to production at the site. Its second Argentina-based site is called Pastos Grandes and is essentially at the point of having a $30 million budget approved.
In the U.S., Lithium Americas Company is bolstered by its Thacker Pass project. That project is pre-construction, like Pastos Grande.
Lithium Americas Company maintains $440.8 million in liquidity. Given that the company had $510.6 million to end 2021, it looks set to remain solvent for several years. Analysts highly favor the firm and its projects, each of which has at least 40 years of expected productivity ahead of them. That exemplifies why investors should consider LAC stock.
Standard Lithium (SLI)
Standard Lithium has investors and analysts excited for a few important reasons. For one, Standard Lithium’s primary operations are located in an area of Arkansas that has long been home to brine production. The mineral-rich brine has been pumped from beneath Arkansas for the past 60 years. Traditionally, bromine and other minerals have been extracted from the brine.
But Standard Lithium aims to apply its patent-pending extraction process in the more than 150,000 acres that comprise the so-called Lanxess Project. If the company’s direct extraction process is as efficient as the company hopes, it could cut lithium extraction times down massively. Currently, it can take up to a year for lithium extraction, but the company’s technology may be able to reduce that time to a matter of a few hours.
Cheap Lithium Stocks: Albemarle (ALB)
Chances are that readers interested in lithium stocks are well aware of Albemarle (NYSE:ALB). The Charlotte, North Carolina-based firm carries the largest market capitalization of any firm on this list at $28 billion and is a great starting point for any lithium investment.
It isn’t particularly cheap at $235 per share. However, it does carry a target price of $280, meaning it is arguably cheap in the relative sense.
While it might not be an inexpensive stock, Albermarle is an incredibly strong and consistent performer. The company just reported its 13th consecutive earnings beat with $1.48 billion in sales in the quarter. That significantly outpaces the expectations of Wall Street, which was anticipating $1.43 billion in sales. That meant that the company reached an EPS figure of $3.45, much higher than the $3.04 the street was looking for.
Cheap Lithium Stocks: Sociedad Quimica y Minera de Chile (SQM)
Sociedad Quimica y Minera de Chile (NYSE:SQM) stock perhaps doesn’t have the same amount of upside as other shares on this list. It’s about $10 off of its target at its current price of $95. That said, the company is rapidly growing and improving.
Investors should understand that from the perspective of fast growth, SQM shares are incredibly attractive. In the first quarter of 2022, the company reported $2.02 billion in revenue, up from $528.5 million a year prior. Lithium sales accounted for $1.45 billion of its revenue, so it’s very fair to assert that Sociedad Quimica y Minera de Chile is growing rapidly.
It also continues to improve quickly. When the company released those earnings nearly three months ago, EPS expectations sat at $1.63. Those same EPS expectations have since risen to $3.12.
Piedmont Lithium (PLL)
Piedmont Lithium (NYSE:PLL) stock represents a lithium exploration company. Given the very nature of exploration is highly speculative, it’s easy to understand why PLL stock contains roughly 100% upside from its current $45 price.
Despite the company’s unanimous “buy” rating, it should be noted the firm has missed EPS consensus figures in the last two quarters.
The company has plenty of upside, though, as analyst ratings suggest. The company was recently added to the Russell 2000 Index and the Russell Microcap Index. The company redomiciled in 2021 in order to qualify for major indices like these. The increased visibility should lead to more attention for PLL stock as lithium production continues to gain traction.
That should mean increasing investor capital, and in turn, higher share prices.
Cheap Lithium Stocks: Livent (LTHM)
Livent (NYSE:LTHM) stock is arguably among the best lithium stocks to consider. Investors who take a look at the firm’s recent earnings report will quickly understand why.
First, Livent performed very well based on the results in its Q2 earnings report. Revenue increased more than 100%, reaching $218.7 million. That led to a net income of $60 million in Q2, up from a still-positive $6.5 million a year earlier. What that means is Livent is fundamentally very sound. In a growth sector like lithium, that’s a strong consideration for investors.
Those results allowed the firm to revise guidance upward, another good sign. Perhaps most importantly, Livent entered into a long-term supplier relationship with General Motors (NYSE:GM). General Motors is investing heavily into EVs and will begin receiving Livent’s lithium hydroxide shipments in 2025. As part of the deal, Livent receives a $198 million advance payment to be made in 2022.
Sigma Lithium (SGML)
If the firm’s feasibility studies are correct, those reserves could produce 220,000 tons of lithium annually at a low cost. If that goes well, then the company intends to double production, meaning it could deliver 440,000 tons of battery-grade lithium on an annual basis in the future.
Investors who are willing to take that leap of faith will receive shares for about $20. That gamble could prove to be a bargain should production meet expectations moving forward.
On the date of publication, Alex Sirois 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.