The lithium craze has reached new heights, with prices for the element skyrocketing more than 400% in the past couple of years. Electric vehicle (EV) sales are on an upswing, and investors have flocked to companies that produce them as their investment of choice. Lithium batteries are critical for the proliferation of EVs, which is why investors have gravitated toward the best lithium stocks to buy.
With the increasing demand for lithium-ion batteries as well as energy storage systems that save power from being lost during distribution, some estimates point to a doubling of this mineral in the next few years. The U.S., through its Infrastructure Investment and Jobs Act, set aside $5 billion in federal funding for EV charging stations. The goal is to get EVs to account for 50% of new auto sales by the conclusion of this decade.
Best Lithium Stocks: Lithium Americas (LAC)
Lithium Americas (NYSE:LAC) is a lithium mining startup that is currently in the pre-revenue stage. It is developing a mine in Argentina with its partner Ganfeng (OTCMKTS:GNENF). However, the investor enthusiasm in the stock relates to its Nevada mine called the Thacker Pass project. LAC aims to capitalize on the growing demand for lithium by electric car producers and other sectors. If the Thacker Pass project is greenlit, it could produce nearly 60,000 tonnes of lithium.
Based on current prices of roughly $50,000 per tonne, the company could be looking at a whopping $3 billion in annual sales. LAC stock has recently enjoyed a terrific run at the stock market as investors bid up lithium assets. Though the market faces considerable headwinds, LAC remains an excellent speculative stock.
Livent Corp (LTHM)
Livent Corp (NYSE:LTHM) is one of the top pure plays in the lithium industry. It’s a business that’s known for low-cost production of carbonate, particularly in Argentina. Livent has produced lithium products at low costs remarkably well and effectively produces lithium carbonate and hydroxide. Its top-line and bottom-line results have been stellar over the past five years, with revenue and earnings averaging in at 8.9% and 35.9%, respectively.
The company expects its lithium carbonate production capacity to rise from 20 kilo tonnes per annum (ktpa) to 100 ktpa by 2030. In achieving this goal, Livent is quickly expanding its footprint in Argentina. Moreover, results of late have been tremendous, with the company posting comfortable earning beats in the past several quarters.
Best Lithium Stocks: Piedmont Lithium (PLL)
North Carolina-based Piedmont Lithium (NASDAQ:PLL) is another pre-revenue lithium miner. It aims to “serve the important vehicle and stationary storage markets in the USA and Europe.” The lithium hydroxide is primarily sourced from China, and Piedmont hopes to change things around in this regard meaningfully.
Due to some nifty acquisitions last year, the company is showing signs of potentially becoming a lithium conglomerate. However, the market remains fixated on its regulatory challenges and has turned a blind eye to the miner’s massive long-term potential. Moreover, it has stakes in some of the top lithium projects, including Sayona Mining and Atlantic Lithium. If it can get its lithium mining and processing plants in North Carolina up and running, it is likely to become a massive player.
Albemarle (NYSE:ALB) is a specialty chemical giant that operates three main segments: bromine, lithium and catalysts. The lithium business accounts for roughly 42% of total sales, and the enterprise owns facilities across Nevada, China, Taiwan and Germany, which makes it a global firm.
It sells lithium through fixed and variable contracts but has recently decided to go all in on variable-priced contracts. The move will likely benefit the company immensely, as lithium prices will likely remain robust for the foreseeable future. Albemarle will be increasing its production capacity in the next three to five years to meet the growing demand. Consequently, its capacity could rise by 127.3% by 2025. Its strong position in the space has enabled it to become remarkably profitable over the past decade, rewarding its shareholders with increasing dividends for the past 27 years.
Best Lithium Stocks: Sociedad Quimica y Minera de Chile (SQM)
Sociedad Quimica y Minera de Chile (NYSE:SQM) is a Chilean low-cost lithium producer with strong exposure to the profitable fertilizer market as well. Nevertheless, the lithium and derivatives segment accounts for 40% of sales, confirming its strong focus on its lithium division. The enterprise focuses purely on lithium carbonate but is expanding into lithium hydroxide through its investments in Australia.
Moreover, the business is already profitable — a rarity in the segment. That has plenty to do with the diversity of its income streams. Lithium sales during the first quarter rose 59%, and prices have spiked by close to seven times due to the push toward electrification. These trends will likely strengthen over time, benefiting the business immensely.
Standard Lithium (SLI)
Standard Lithium (NYSEMKT:SLI) is an innovative lithium development company that could potentially blow up in the coming years. Its flagship project is located in Southern Arkansas and is called Lanxess, which could deliver 20,900 tons of lithium carbonate. It’s still early days in the plant’s development, but it could become a major lithium source down the road.
The Lanxess brine project is arguably the most advanced in the U.S. Preliminary assessments point to a project life of nearly 25 years. The average annualized sales to be generated from the project are close to $283 million. Additionally, the competitive advantages of the plant are unparalleled, marked by a robust infrastructure. SLI is still in its early stages of becoming a major player, but its long-term growth outlook is staggering.
Best Lithium Stocks: Tesla (TSLA)
Tesla (NASDAQ:TSLA) is far from being a pure play in the sector, but being the biggest EV producer, it’s easy to understand why it’s on the list. It’s one of the few companies that is actually delivering EVs to customers in massive numbers. Naturally, the growing demand for its vehicles will continue to increase the demand for lithium batteries.
However, with rising metal prices, the supply-demand imbalance has become a major talking point in the sector. The company’s eccentric CEO Elon Musk tweeted a few months ago how Tesla would have to go into the lithium mining and refining business soon. With an incredible track record in the EV space, I wouldn’t be surprised if it can successfully execute its plans down the road. That would surely end up limiting its cost burden.
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.