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The Rise of EVs Is Good News for Lithium Prices. Why Wall Street Is Still Cautious on Miners' Stocks.The Rise of EVs Is Good News for Lithium Prices. Why Wall Street Is Still Cautious on Miners' Stocks.Root, Al.Barron's (Online); New York Wall Street is slowly getting more bullish on lithium mining companies. Their stocks are benefiting from rising prices and the electric-vehicle boom, but analysts still have their concerns. On Thursday morning, RBC analyst Arun Viswanathan upgraded shares of Albemarle (ticker: ALB) to Hold from Sell. His price target went to $168 from $135 a share. Albemarle stock rose 1.2% to $156.49 in recent trading. Viswanathan had downgraded Albemarle shares in October to Sell because he believed lithium miners' valuations were "outpacing weakened lithium fundamentals." Now things are looking better as EV demand remains strong and lithium prices climb. Lithium products are key components of the rechargeable lithium-ion batteries used in modern electronics—including EV battery packs. Industry projections have lithium volume growing at an average annual rate of about 25% between 2020 and 2025, then growing at about 20% a year on average between 2025 and 2030. The industry will have to multiply in size to meet that demand, and prices will have to rise to justify the investment. In the short run, the improved outlook has led Viswanathan to raise is 2021 and 2022 earnings estimates for Albemarle. With the upgrade, now only five analysts—or 21% of the total covering Albemarle—rate shares Sell, down from 25% previously. The average Sell-rating ratio for stocks in the Dow Jones Industrial Average is less than 10%. There is still some trepidation on Wall Street about the stock. About 46% rate Albemarle shares Buy, lower than the Dow's average Buy-rating ratio of about 60%. Still, Wall Street sentiment is improving: In October 2020, only about 30% of analysts rated Albemarle stock Buy. The largest lithium mining stocks aren't all that well loved. Roughly 40% of analysts covering Livent (LTHM) and SQM (SQM) rate shares Buy. Wall Street prefers the risk/reward set up in small-capitalization mining stocks. Piedmont Lithium (PLL), for instance, has a 100% Buy-rating ratio. Lithium Americas (LAC) has a 78% Buy-rating ratio. As a group, these five stocks have largely done well, with an average gain of 323% over the past year. Four of the five are up year to date, but Livent stock is down about 8% so far in 2021. LIvent was getting a boost Thursday, though, on the back of the Albemarle upgrade. It shares climbed 3.2% in recent trading. |
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