Analysts think these lithium supply stocks could be winners
Goldman Sachs says the peak in battery metal prices is approaching, as supply catches up with demand. Lithium, cobalt and nickel are among the few essential raw materials used in electric vehicle batteries. Cobalt and nickel prices have already fallen 35% and 40% respectively since the second quarter of 2022, Goldman noted, but lithium has bucked the trend. Prices hit a record high over the same period on a surge in restocking, but the bank expects prices to start to fall in the second half of 2023. In a note from Nov. 9, analysts led by Aditi Rai said a slowdown in demand in China — the largest EV market in the world — over the next couple of years will start to put “downward pressure” on prices. Rai added that “decoupling [the] battery supply chain from China is not easy.” Given this outlook for battery metals, CNBC Pro screened the Global X Lithium & Battery Tech ETF for EV-related stocks that could offer opportunities to investors. These stocks are expected to post earnings growth in full-year 2023, are buy rated by the majority of analysts covering them, and have average potential upside of at least 20% over the next 12 months. Tesla , the world’s most famous EV maker, made the list. While the company is best-known for its line of electric cars, it also produces part of its battery requirements in-house. Tesla is evaluating the feasibility of a lithium hydroxide refining facility on the Gulf Coast of Texas, with a focus on the development of battery-grade lithium hydroxide. The EV giant is expected to grow its earnings per share by 41.8% next year. The stock is rated buy by 51% of analysts covering it, who give it average potential upside of 51.4%. Chinese automaker BYD also appeared on the screen. The firm, which is backed by Warren Buffett’s Berkshire Hathaway , is expected to grow EPS by 61.6% next year. The majority of analysts covering the stock — 70% — rate it a “buy” and give the stock an average potential upside of 81.7%, according to FactSet data. Chinese battery manufacturer Contemporary Amperex Technology is another stock expected to grow earnings next year. The company is expected to increase EPS by 51.1% next year, with analysts covering the stock giving it average upside of 47.5%.
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