We recently compiled a list of the 10 Best Battery Stocks To Buy Now According to Short Sellers. In this article, we are going to take a look at where Arcadium Lithium plc (NYSE:ALTM) stands against the other battery stocks.
Electric vehicles are the latest trend in the automotive market which is revolutionizing the whole industry. According to Grand View Research, the global electric vehicle (EV) market was valued at $1.07 trillion in 2023 and is projected to grow at a compound annual growth rate (CAGR) of 33.6% from 2024 to 2030 and reach $8.85 trillion by the end of the forecast.
The growth is driven by government policies, incentives, and advancements in battery technology, which are making EVs more affordable and appealing. The transportation and logistics sectors are increasingly adopting EVs due to their lower emissions and operational costs, with companies like Amazon integrating electric trucks into their fleets.
Similarly, Grand View Research believes that the global EV battery market was valued at $44.69 billion in 2022 and is projected to grow at a CAGR of 21.1% from 2023 to 2030. Strategic collaborations among battery manufacturers, e-mobility providers, and energy suppliers are improving battery durability and lifespan, while the increasing production of EVs in countries like China, Germany, and Japan, along with government investments in EV charging infrastructure, is further accelerating the market. However, fluctuating raw material prices, such as lithium-ion, could impact production costs.
The Growing Importance of Critical Minerals in Energy Transition
According to BP’s Energy Outlook 2024, the transition to a low-carbon energy system will require a substantial increase in the use of critical minerals, such as copper, lithium, and nickel, essential for supporting the infrastructure and assets needed for this transition. According to the report, the rapid expansion of electric vehicles is projected to reach 1.2 billion (current trajectory) to 2.1 billion (goal to reach Net Zero) by 2050, which will significantly increase the demand for batteries and in turn, higher demand for minerals like lithium and nickel.
Copper demand is expected to rise by 75-100% by 2050, mostly due to its use in EVs and the extension of electricity networks. Lithium demand could grow 8 to 14 times by 2050, mainly driven by its use in EV batteries, which will account for about 80% of total lithium demand by 2050. Lastly, nickel demand is projected to increase two to three times by 2050, with most of this growth linked to lithium-ion batteries in EVs.
How Competitive Pricing and Leasing Are Shaping the EV Market
In an interview at CNBC Power Lunch, Erin Keating, Cox Automotives executive analyst, explored the factors shaping the EV market. She noted that Tesla and Chevy initially dominated EV sales, which is why a growing supply of used cars from the former is now available. These used EVs have become more affordable, partly due to tax credits of up to $4,000. This is helping to drive sales in the used EV market and making it a more attractive option for consumers.
However, the lease market is offering deals that compete with used EV prices. According to Keating, while this puts downward pressure on used EV prices, she emphasized the benefit of the situation and said that more leased vehicles today will enter the used market in a few years, which will ensure a steady supply of affordable used EVs in the future.
Keating also addressed the issue of buyer’s remorse, as some people are frustrated with the slower development of EV infrastructure and range anxiety. Despite this, she reassured consumers that the batteries in used EVs are holding up well with minimal degradation.
It means consumers can trust the longevity of these vehicles, and automakers are committed to supporting them. Although some challenges remain, she believes that as infrastructure improves, consumer confidence and adoption of EVs will continue to grow.
Our Methodology
For this article, we used stock screeners and ETFs including Amplify Lithium & Battery Technology ETF and Lithium & Battery Tech ETF to identify companies involved in the EV battery market. We then selected 10 stocks with the smallest short interest and listed them in descending order of their short interest. We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A miner hard at work, extracting raw lithium from a mineral resource.
Arcadium Lithium plc (NYSE:ALTM)
Short Interest as % of Shares Outstanding: 7.31%
Number of Hedge Fund Holders: 19
Arcadium Lithium plc (NYSE:ALTM) is a significant player in the lithium production industry and it was formed from the Allkem-Livent merger in January 2024. With interests in various properties across Argentina, Canada, and Western Australia, the company is well-positioned to meet the growing demand for lithium, a critical component in battery manufacturing for EVs and energy storage systems.
As a global producer of lithium chemicals, the company is involved in a range of extraction processes, including hard-rock mining, conventional brine extraction, and direct lithium extraction (DLE). It produces a variety of lithium products essential for high-performance batteries, such as battery-grade lithium hydroxide, lithium carbonate, and butyllithium. These products support multiple industries, including automotive, electronics, agriculture, and pharmaceuticals.
The company is focusing on investments to enhance production capabilities. In August, it acquired Li-Metal’s lithium metal business for $11 million. The acquisition is expected to boost the company’s production of lithium metal and specialty products, especially its butyllithium and other specialty chemicals. This move aims to create the scale needed to meet the increasing demand for next-generation battery materials derived from lithium metal.
Despite recent challenges in the lithium market, including an oversupply, Arcadium Lithium (NYSE:ALTM) has managed to maintain its performance. The company reported EPS of $0.05 and sales of $254.5 million for Q2, showing an 8% increase from the previous year.
On August 9, KeyBanc lowered the price target on the stock to $8 from $9 but maintained an Overweight rating. KeyBanc notes that the company is appropriately adjusting its capacity expansion plans and focusing on its balance sheet amid the current market downturn.
Arcadium Lithium (NYSE:ALTM) was part of 19 hedge funds’ portfolios in the second quarter with a total stake value of $51.99 million. It takes the 6th spot on our list of the best battery stocks to buy according to short sellers.
First Pacific Advisors stated the following regarding Arcadium Lithium plc (NYSE:ALTM) in its Q2 2024 investor letter:
“Arcadium Lithium plc (NYSE:ALTM) is an integrated, low-cost, well-managed lithium producer formed by the merger of Livent, which the Fund owned, and Allkem in Australia. The merger was completed at the beginning of the year and we received, and decided to hold, shares of Arcadium. The share price has declined because of volatile lithium prices that collapsed from bubbly levels at the beginning of 2023.27 Estimates for electric vehicle production are slowing and capacity got ahead of demand; the industry is now waiting for a supply response.
Arcadium is an unusual investment for us. We normally avoid the commodity and materials sectors, and have kept our position in Arcadium small. But we believe Arcadium has a unique position in an industry with a strong long-term outlook. The company has low-cost production assets, is virtually debt-free, and has considerable capacity additions planned near-term.”
Overall ALTM ranks 6th on our list of the best battery stocks to buy. While we acknowledge the potential of ALTM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ALTM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.