Overall, the lithium industry had been negatively impacted by the global pandemic last year. However, the demand for electric vehicles (EVs) soared in the latter half of 2020 and grew 43% globally for the full year. Lithium manufacturers, though, have struggled with prices primarily due to oversupply. However, the strong uptick in demand for EV batteries will stabilize the price and the lucrativeness of lithium stocks.
President Joe Biden and his administration have been pushing forward aggressively with their EV expansion plans in the country. Lithium batteries are used to power EVs, so lithium stocks are likely to be more profitable investments as we advance. Moreover, lithium prices can come under pressure in the short term. Thus, it is important to keep a long-term horizon in mind while investing in lithium stocks.
With that being said, here are three of the top lithium stocks which represent the industry’s cream of the crop.
- Albemarle (ALB)
- Livent Corporation (LTHM)
- Sociedad Química y Minera de Chile (SQM)
Now, let’s dive in and take a closer look at each one.
Albemarle Corporation (ALB) is involved in the development, marketing and engineering of specialty chemicals. Despite a tough 2020, it has some interesting growth prospects in its lithium operations reflected in its most recent earnings. The company expects lithium demand to rise at a healthy rate in the coming years. And accordingly, it plans to expand its production capacity.
In turn, it will be spending roughly $1.5 billion over the next five years on lithium projects across China, Australia and Nevada. Hence, ALB stock has a spectacular growth runway ahead with its leadership position in the lithium industry.
Its first-quarter earnings showed revenues of $829.3 million, with a growth of 12.2% on a year-over-year basis. Moreover, their diluted earnings per share (EPS) were at 84 cents. Its lithium revenues for the quarter were at $279 million, representing an 18% growth YOY. This was led to a healthy improvement in volumes, which were partly offset by pricing pressures. Overall, a growing lithium business will continue expanding the company margins at an incredible rate.
Livent Corporation (LTHM) is a pure-play lithium company, and is among the top five global lithium producers. 2020 was challenging, as it reported negative revenue growth numbers for the better part of the year. However, it is on the comeback trail posting strong numbers in the past couple of quarters. And with a robust macroeconomic outlook, there is plenty of upside to investing in LTHM stock.
The company recently posted its first-quarter earnings, where its revenues rose roughly 34% YOY to $91.7 million. Moreover, its adjusted EBITDA was at $11.1 million, representing a 18% growth from the prior-year period.
Additionally, it expects its performance for the full year to be at the higher end of its guidance ranges. Also, Livent announced several new sustainability goals to achieve carbon neutrality by 2040. Thus, its adherence to environmental, social, and governance (ESG) principles could fetch a premium valuation down the line.
Sociedad Química y Minera de Chile
Sociedad Química y Minera de Chile (SQM) is a Chilean commodity play with a prime focus on lithium and potassium. Similar to its peers, it had a rough last year, but things are moving in the right direction off-late amidst the improving industry outlook.
Analysts expect a massive improvement in revenue growth moving forward, with estimates that are well ahead of the sector average. Therefore, SQM stock could return to winning ways in the coming months.
It recently reported a 180% increase in lithium sales volumes in its first quarter. As a result, it boosted its 2021 outlook for lithium carbonate sales volumes by at least 30%. The company also expects higher average prices through the end of the year. Additionally, it is also optimistic about its expansion plans in Chile and strong demand for lithium chemicals.
On the date of publication, Muslim Farooque 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.
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