Lithium demand is improving, and prices are rebounding as a result. Accordingly, investors are perking up as various lithium stocks provide unique opportunities to capture explosive growth in this volatile sector.
Much of this demand is coming from battery manufacturers, who are demanding more inputs materials. This sets the stage for increasing prices and continued valuation growth on the horizon for lithium suppliers.
Inventory levels peaked in late-2022, as producers previously took advantage of subsidies. The overproduction that resulted created a dip lull in prices, due to the excess supply on the market.
That said, the dynamics in the lithium sector are improving, and investors are now in the driver’s seat. Here are three stocks to buy to catch a wave of explosive upside potential this year and beyond.
| LAC | Lithium Americas | $20.12 |
| LITM | Snow Lake Resources | $2.44 |
| SQM | Sociedad Quimica y Minera | $69.65 |
Lithium Americas (LAC)
Lithium Americas (NYSE:LAC) is currently among the most prominent opportunities in the lithium mining sector. I think this major lithium miner is going to remain a massive opportunity for years to come. That’s because the company has recently commenced mining operations at its Thacker Pass site.
Thacker Pass is the largest lithium resource in the United States, and Lithium Americas only recently received permission (in February) to begin operations at the site. In March, construction commenced.
General Motors (NYSE:GM) committed an impressive $650 million equity investment in the project in January. That investment was the largest ever by an auto manufacturer into its raw material supply. Once operational, it is expected that Thacker Pass will provide enough lithium for the production of 1 million EVs annually.
Lithium Americas has set a strong foundation to become an integral link in the North American EV supply chain. Not only will it support General Motors as it brings EVs online, but the company provides investors with geopolitical upside, should macro conditions worsen via various conflicts globally. Notably, Lithium America’s Argentine operations will operate as a separate entity moving forward, but also provide additional geopolitical diversification to investors.
Snow Lake Resources (LITM)
Snow Lake Resources (NASDAQ:LITM) certainly fits the bill of a lithium stock with explosive upside potential. It trades for around $2.50 per share, yet the sole analyst covering the stock has its share price pegged at $15.
The company’s massive potential is derived from its geographic positioning, resources, and untapped and unexplored assets. Snow Lake’s core project is located in northern Manitoba, and is widely expected to serve the burgeoning North American EV market. In terms of resources, Snow Lake Lithium owns the rights to 60,000 acres of lithium mining grounds expected to produce enough lithium to power 5 million EVs over 10 years.
What’s more, only 1% of that 60,000 acre northern Manitoba site has been explored. Proven reserves suggest that there could be a much higher concentration of lithium at the site. If that is the case, LITM stock can easily provide quick returns as those reserves are proven.
Notably, U.S. firms are eager to secure lithium resources that align with geopolitical allies. Canadian firms have greater explosive upside potential for that reason.
Sociedad Quimica y Minera (SQM)
Sociedad Quimica y Minera (NYSE:SQM) is a more diversified and established lithium stock than others on this list. For that reason, it might appeal to more conservative investors. That said, the company also simultaneously offers high upside that attracts investors across the risk spectrum.
The company mines lithium along with fertilizer inputs, iodine, potassium, and other chemical inputs. Of the firm’s $2.26 billion in revenues in the first quarter, $1.65 billion were attributable to lithium sales. Thus, the company is mainly a lithium play, but offers stability in its range of offerings in other commodities as well.
Interestingly, Sociedad’s revenue growth profile doesn’t align with its valuation of late. The company saw a 12% revenue increase this past quarter. However, the company’s share price has fallen since its report.
Investors appear to be taking a cautious stance toward commodity stocks such as SQM. However, analysts expect SQM stock can rise $22 beyond its current $70 share price. Lithium prices are again moving in the right direction, and that makes SQM stock worth buying at this time.
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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.