Why BofA Is Upping the Ante on 2 Top Lithium Producers

Lithium stocks have become increasingly popular over the years as the electric vehicle (EV) trend has really taken off with the likes of Tesla. Lithium plays a central role in the production of these EVs at the heart of the vehicle, the battery. While EVs gain in market share, the demand for lithium is sure to rise accordingly, as production is somewhat limited in a constrained supply-and-demand model.

With the broad markets pulling back over the course of January, investors easily could find an opportunity for entry, especially considering the S&P 500 saw the worst trading month since March 2020. As it stands, that’s what one analyst sees now, an opportunity for entry for a highly lucrative industry.

BofA Securities took a look at two of the major names within the lithium production industry. The analyst noted that these stocks have moved considerably off their highs and now might be a good time to get into these stocks. Also check out more of Monday morning’s analyst calls here.

Specifically, the firm is looking at Albemarle Corp. (NYSE: ALB) and Livent Corp. (NYSE: LTHM), which are 22% and 29% off their highs, respectively. This compares with the broader Materials Select Sector SPDR Fund (NYSEARCA: XLB), which is only down 7% in that time. These two companies have significantly underperformed many of their smaller cap peers. Despite the underperformance from November’s price peaks, the underlying markets appear to have improved materially, with lithium prices rallying anywhere between 12% and 110%, depending on the benchmark.

The conclusion is that BofA sees the risk-reward for these shares as more balanced, versus what they previously saw as overbought. Overall, the firm remains constructive on the lithium market over the medium term as well. As for the actual calls:

BofA Securities upgraded Albemarle to Neutral from Underperform. The stock last closed at $220.74, in a 52-week range of $133.82 to $291.48. Shares are down 5.6% year to date, though up 32.7% over the past year. The consensus price target is $261.29, and the market cap is $25.8 billion.

The firm lifted its Underperform rating on Livent to Neutral. The stock closed most recently at $23.01, and the 52-week range is $14.73 to $33.04. Shares are down 5.6% year to date, but they are 18.7% higher over the past year. The consensus analyst price target is $29.65. The market cap is $3.7 billion.

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