With markets setting records, can this sweltering sector continue to rise?

The stock market had a strange day on Friday, with pockets of the market doing well while others took fairly big hits. More extreme measures to control the COVID-19 pandemic abroad are beginning to worry US investors, as the shutdown could exacerbate supply chain problems and lead to headwinds for global economic expansion. That’s a big part of why there’s a file Dow Jones Industrial Average (DJINDICES: ^DJI) And Standard & Poor’s 500 (SNPINDEX: ^GSPC) Dropped on Friday, even with Nasdaq Composite (Nasdaqindex: ^ IXIC) It reached another record closing level above 16000.


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Data source: Yahoo! finance.

Almost every investor knows that the electric car space has received a lot of attention from the market community, which has caused the shares of electric car manufacturers to rise sharply. This trend has also benefited lithium stocks significantly, and the major players in the field posted sharp gains on Friday. However, since lithium production is largely a commodity business, some investors are questioning whether these stocks are worth participating in the same bull market as the electric car manufacturers themselves. Below, we’ll look at how lithium stocks have acted recently and what the future could bring.

A salt lake with a mountain range behind it.

Image source: Getty Images.

Another big day on the lithium front

The major lithium producers had another strong day. Americas Lithium (New York Stock Exchange: Lake) It was the biggest winner, rising 13% to an all-time high. The company received positive comments from stock analysts in JP Morgan, increasing the target price for lithium stock by $11 per share to $39. Analysts love the fact that Lithium Americas has been bold in pursuing strategic acquisitions to become a larger player in the rapidly growing space.

However, other lithium stocks were also higher amid strong lithium prices and an overall favorable environment. Albemarle (New York Stock Exchange: ALB) It was up about 2.5% on Friday, while Piedmont lithium (Nasdaq: PL) I picked up 4%. Levent (New York Stock Exchange: LTHM) A more modest 1% profit. even in Standard lithium (NYSEMKT: SLI)who witnessed Big Drops Thursday After short selling researchers criticized the company, Recovered with a 16% rise on Friday.

Bull and Bear Case for Lithium

Lithium investors are relying primarily on continued increases in demand for lithium as part of electric vehicle battery systems. With high production numbers not only among industry giants Tesla (Nasdaq: TSLA) But also for many promising Chinese electric car manufacturers, the need for batteries that can power these vehicles is growing exponentially.

The big question is whether battery technology will continue to rely on lithium indefinitely. At least for now, the answer to that question appears to be yes, even as some of the most innovative players in battery technology continue to focus on lithium’s preferred chemical qualities. for example, Quantumscape (New York Stock Exchange: QS) It hopes to increase production of a battery alternative that it thinks is better than current conventional EV batteries, but Even the design of QuantumScape still uses lithium – Albeit in a different way.

Regardless, one thing investors must bear in mind is that while electric vehicle technology providers are at the forefront of innovation, lithium producers will compete fiercely to find the best resources to meet demand. That could put pressure on everyone in the industry, so it’s not certain that every lithium-ion stock will fully participate in the electric vehicle revolution in the coming years.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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