We recently published a list of the 11 Most Promising EV Battery Stocks According to Analysts. In this article, we are going to take a look at where Arcadium Lithium plc (NYSE:ALTM) stands against the other promising EV battery stocks.
Despite the electric vehicle industry growing at a fast pace, some challenges remain. The major ones are range anxiety among consumers, slow battery charging time, and the availability of charging infrastructure. However, even with these challenges, the industry remains healthy and a lot of energy and resources are being contributed toward it.
The infrastructure market is expected to grow at a phenomenal pace as PwC expects the EV supply equipment (EVSE) market to grow from $7 billion to $100 billion by 2040, at a 15% compound annual growth rate.
For electric vehicle components, governments around the world are incentivizing EV production. For example, the U.S. Department of Energy (DOE) recently announced $1.7 billion in funding to transition 11 vulnerable auto manufacturing plants across eight states to EV production and related components. For more details, you can read 8 Best EV Stocks to Buy According to Short Sellers.
Advancements in EV Battery Technology
Due to the environmental impacts of internal combustion engines, scientists have also been working tirelessly to solve the current problems faced by EV batteries. Researchers, led by the University of Colorado Boulder, have uncovered the cause of battery degradation, a common issue that leads to reduced capacity over time. Their study, published in Science.org, may pave the way for improved lithium-ion batteries, which are crucial for EVs and energy storage.
Using advanced X-ray technology, they discovered that hydrogen molecules from the battery’s electrolyte bind to the cathode, taking spots meant for lithium ions, which weaken the battery’s performance. This new understanding could help engineers develop longer-lasting, cobalt-free batteries for EVs, which would increase driving range, reduce costs, and address environmental and ethical concerns related to cobalt mining.
Additionally, according to a research report published in Frontiers in Quantum Science and Technology, Yuji Hatano and his team explored the impact of transverse magnetic fields on diamond quantum sensors for EV battery monitoring. Their research aimed to improve measurement accuracy for temperature and magnetic fields, which are crucial for determining the state of charge (SOC).
The study showed that diamond sensors enhance SOC estimation, which could potentially increase the EV cruising range by 10%. A prototype demonstrated high precision with currents up to 1,000 amperes, and misalignment detection was highly accurate. The findings suggest diamond quantum sensors could significantly improve battery monitoring in EVs and other industries.
Moreover, solid-state batteries could also reduce the charging time in batteries which could drastically improve the consumer sentiment and increase the demand for EVs. It was suggested by Mark Fields, former Ford CEO and President on CNBC’s ‘Squawk Box’ and we discussed it in our article on the best EV stocks for the long term. Here is an excerpt from the article:
“Fields suggested that automakers need to offer more affordable EVs and expand hybrid offerings while working towards breakthroughs in battery technology, especially solid-state batteries. These batteries could eventually reduce charging times to match the convenience of filling up at a gas station…
…He emphasized that while automakers are working on delivering low-cost EVs, the real game-changer will be the development of solid-state batteries, which could significantly improve charging times and consumer convenience.”
Our Methodology
For this article, we identified over 20 EV battery stocks through screeners and ETFs. We narrowed our list to 11 stocks with the highest average analyst price target upside, as of September 12. We also added the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 hedge funds as of the second quarter of 2024.
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 close-up of a lithium-ion battery surrounded by a network of silicon nanowires.
Arcadium Lithium plc (NYSE:ALTM)
Average Analyst Price Target Upside as of September 12: 67%
Number of Hedge Fund Holders: 19
Arcadium Lithium plc (NYSE:ALTM) is one of the leading companies in the lithium production sector. It was created through the merger of Allkem and Livent in January 2024. The company operates across major lithium-rich regions, including Argentina, Canada, and Western Australia. With its diversified global presence, the company is well-positioned to cater to the growing demand for lithium.
The stock was held by 19 hedge funds, at a combined value of nearly $52 million in Q2. It is one of the most promising EV battery stocks.
Arcadium Lithium’s (NYSE:ALTM) strategic operations in high-potential regions, combined with its use of diverse extraction methods such as hard-rock mining, brine extraction, and direct lithium extraction, strengthen its ability to supply critical lithium products. These include lithium hydroxide and lithium carbonate, both essential for high-performance batteries.
The company’s recent acquisition of Li-Metal’s lithium metal business supports its focus on expanding production capacity to meet the increasing demand for next-generation battery materials.
In the second quarter, Arcadium Lithium (NYSE:ALTM) realized an average pricing of $17,200 per metric ton for lithium hydroxide and carbonate, with its specialty products, such as butyllithium, fetching even higher prices. The company continues to expand its production capacity, expecting a 25% increase in combined lithium hydroxide and carbonate sales volume for both 2024 and 2025.
Cost-saving initiatives also remain an important point for Arcadium (NYSE:ALTM), as mentioned by the company management during the second quarter earnings call. Integration efforts across legacy businesses are expected to yield cost savings at the high end of the $60 million to $80 million guidance range in 2024.
Additionally, it aims to accelerate its $125 million per annum cost synergy target, previously set for 2027. By slowing down investment in four current expansion projects, the company is adjusting its capital deployment to align with market demand while reducing financial commitments by $500 million over the next 24 months. The decision keeps options open for the future growth of the company without stretching resources too thin during a time of low market prices.
Arcadium Lithium (NYSE:ALTM) has been covered by 27 analysts with a consensus moderate Buy rating. Their average price target is $4.13, which has a 67% upside to the company’s stock at current levels on September 12. The latest Buy ratings come from Kaan Peker from RBC Capital with a $3.60 price target and TD Cowen analyst David Deckelbaum with a price target of $6.00. Both of the analysts last covered the stock on September 5.
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 most promising EV battery stocks. 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, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.