Let’s discuss electrical automobiles (EVs) and their batteries. The excessive worth of gasoline – nonetheless up about $2 since President Biden took workplace – has boosted curiosity in EVs. Larger buyer curiosity will lead naturally to larger demand, and now we get to batteries, and lithium.

Lithium is a metallic component important within the development of high-voltage battery programs, and each EV constructed wants a median of eight kilos of the steel. Business specialists are saying that lithium demand will far outstrip provide for the foreseeable future, till no less than 2030. The predictable consequence is rising costs. Since January of this yr, lithium has doubled in value, and it’s up some 500% or extra prior to now 12 months.

In an vital level, lithium isn’t uncommon. Lodes are well-known, and the important thing bottleneck, in accordance with Tesla CEO Elon Musk, is processing the ores into types usable in trade. Musk sees this level as a possible entry for entrepreneurs, noting that the sphere gives excessive margins and earnings.

“I would love to encourage, as soon as once more, entrepreneurs to enter the lithium refining enterprise. You possibly can’t lose,” Musk stated. He has added, in an analogous context, that “lithium batteries are the brand new oil.”

Towards this backdrop, we’ve used the TipRanks database to find two Purchase-rated shares which can be closely concerned within the manufacturing and refining of lithium, and are well-positioned to profit from a continued growth in lithium demand. Let’s take a better look.

Piedmont Lithium (PLL)

The primary inventory we’re taking a look at is Piedmont Lithium, an organization centered on growing the US share of the world lithium market. As the corporate factors out, the US can declare some 17% of the world’s confirmed lithium reserves, but produces solely 2% of the lithium on the world market. Piedmont has mining belongings in North Carolina, on the confirmed Carolina Tin Spodumene belt lower than an hour’s drive from the town of Charlotte. Piedmont is working to develop these belongings right into a sustainable supply of battery-grade lithium hydroxide, constructing on its advantageous location.

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Piedmont at present holds greater than 1,100 acres within the Tin-Spodumene Belt (TSB) area, and is working to extend its holdings. The TSB was, from the 1950s to the 1980s, the foremost supply of lithium for Western economies, and given its strategic location close to a quickly rising US tech heart, Piedmont believes it will probably turn into that vital as soon as once more. The corporate is focusing on eventual lithium manufacturing of 160,000 tons per yr, with capability to refine that into 22,700 tons of lithium hydroxide yearly.

Along with the North Carolina belongings, Piedmont is actively in search of extra North American lithium sources. In Could and June, the corporate introduced its partnership with Sayona Quebec to the restart the North American Lithium (NAL) mission at Val d’Or, Quebec. The restart will entail prices close to $80 million, however the firm estimates that the mission can attain 168,000 tons yearly of 6% spodumene focus, with a projected lifespan for the mine of 27 years. Piedmont goals to have the NAL in manufacturing throughout 1H23.

Piedmont additionally has a partnership with Atlantic Lithium, for growth of the Ewoyaa mission in Ghana. This mining mission has potential to use some 30.1 million tons of Li2O at 1.26% focus – an industrially viable lithium mine. Whereas Piedmont’s largest reserves are in North Carolina, you will need to observe that the Quebec and Ghana tasks are transferring ahead on a quicker timeline.

Of curiosity to traders, Piedmont in July of this yr turned a member of the Russell 2000 inventory index.

In protection for Cowen, analyst David Deckelbaum notes all of this, particularly the corporate’s upcoming catalysts and the long-term nature of its Carolina belongings. He writes: “Piedmont is an under-appreciated vertical integration lithium story that has vital potential to develop a presence within the U.S. as a number one battery grade hydroxide converter, fed by advantaged spodumene contracts. PLL is catalyst wealthy in 2H22, together with bulletins round its LHP-2 conversion facility and first spodumene gross sales in Quebec in 1H23, among the many earliest of non-producing names…”

“Carolina Lithium will certainly current a horny progress alternative past 2025 because the mine and plant undergo obligatory allowing, however within the meantime, we count on shares to start to replicate worth from extra close to time period spodumene manufacturing on the Abitibi Hub in Quebec and Ewoyaa in Ghana,” the analyst added.

Deckelbaum’s feedback assist his Outperform (i.e. Purchase) ranking on the shares, and his worth goal, at $90, suggests an upside of 67% within the coming months. (To observe Deckelbaum’s observe document, click on right here)

Piedmont has attracted optimistic consideration from Wall Avenue, and its Three optimistic current analyst evaluations add as much as a Robust Purchase analyst consensus ranking. The $89 common worth goal implies a one-year acquire of 65% from the present buying and selling worth of $53.73. (See Piedmont inventory forecast on TipRanks)

Albemarle Company (ALB)

Sticking with the North Carolina industrial sector, we’ll flip to Albemarle, a specialty chemical firm focuses on lithium and bromine refining. Albemarle is at present the world’s largest supplier of battery-grade lithium merchandise for the EV market. The Charlotte-based firm boasts a worldwide community, and three main worldwide sources for its lithium: two salt-lake brine sources, one in Chile and one in Nevada, and a 49% share in Australia’s Talison spodumene mine.

Rising costs and growing demand within the lithium markets have been benefiting Albemarle, as a fast look on the firm’s revenues and earnings makes clear. Albemarle has seen regular positive factors in each over the previous six quarters, and the current 2Q22 monetary report confirmed continued large positive factors. The highest line got here in at $1.48 billion, up 91% year-over-year, whereas adjusted EPS was reported at $3.45, a tremendous 288% larger than the year-ago outcome.

Of those outcomes, a powerful $891.5 million in complete revenues got here from the lithium phase of Albemarle’s enterprise. This was a 178% enhance year-over-year.

Wanting ahead, Albemarle has guided towards full-year outcomes for 2022 of $7.1 billion to $7.5 billion, greater than double the 2021 precise income, and expects full-year adjusted earnings of $3.2 billion to $3.5 billion, greater than 3 times final yr’s complete. Together with this spectacular steerage, Albemarle additionally expects that its enterprise will flip cash-flow optimistic this yr.

5-star analyst Colin Rusch, from Oppenheimer, holds the #Three ranking total amongst Wall Avenue analysts, and he’s unabashedly upbeat on Albemarle.

“ALB posted one other spectacular beat and lift quarter because it continues to transition lithium contracts to index pricing… We’re inspired to see supply of preliminary volumes from Kemberton as we consider the corporate will successfully optimize its manufacturing from right here. We spotlight ALB’s meaningfully larger money era supporting capex for its enlargement with current belongings as nicely a possible for incremental M&A. We proceed to consider traders are underestimating the resilience of Lithium pricing given substantial demand and the reliance of newer battery chemistries on lithium high quality. We stay bullish on ALB shares,” Rusch wrote.

Acknowledging the corporate’s potential progress, Rusch charges ALB shares an Outperform (i.e. Purchase), and his $440 worth goal suggests an upside of ~70% for the yr forward. (To observe Rusch’s observe document, click on right here)

What does the remainder of the Avenue suppose? Wanting on the consensus breakdown, opinions from different analysts are extra unfold out. 9 Buys, four Holds and a couple of Sells add as much as a Reasonable Purchase consensus. As well as, the $282.43 common worth goal signifies ~9% upside potential. (See Albemarle inventory forecast on TipRanks)

To seek out good concepts for shares buying and selling at enticing valuations, go to TipRanks’ Finest Shares to Purchase, a newly launched instrument that unites all of TipRanks’ fairness insights.

Disclaimer: The opinions expressed on this article are solely these of the featured analysts. The content material is meant for use for informational functions solely. It is rather vital to do your personal evaluation earlier than making any funding.