We recently compiled a list of the 12 Biggest Lithium Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where FMC Corporation (NYSE:FMC) stands against the other lithium stocks.
Lithium is a soft, silver-white alkali metal that has become a cornerstone of the clean revolution. Its commonly used form, lithium carbonate, is required for the production of lithium-ion batteries. These power a variety of technologies, including vast renewable energy storage systems and electric vehicles (EV), making them nearly indispensable in the development of sustainable energy solutions. Although EVs have been available for a while, it wasn’t until recent technology breakthroughs and cost reductions that they became a more reliable option for consumers, resulting in an increase in lithium demand. The International Energy Agency states that the demand for lithium will climb by over 40 times between 2020 and 2040, particularly for use in battery storage and electric cars. As per Fortune Business Insights, the global lithium market achieved a valuation of $22.19 billion in 2023 and is expected to reach $134.02 billion by 2032, reflecting a CAGR of 22.1%.
According to a McKinsey report, the global drive to net-zero will depend on guaranteeing a consistent supply of essential battery raw materials, especially as demand for EVs climbs toward the latter of this decade. Based on the report, the global market for BEV passenger cars is expected to increase sixfold between 2021 and 2030, with yearly sales rising from 4.5 million to almost 28 million units during that time. In addition, such a forecast indicates that the sector is “likely to confront persistent long-term challenges” in line with demand. McKinsey also states that 80% of all lithium mined now is used by battery manufacturers, and by 2030, that number may rise to 95%.
On the other hand, analysts predict increased volatility in lithium carbonate in 2024, following a challenging year in which the metal’s price plunged 22% due to a global supply glut. However, some balance is expected to recover. S&P Global predicts that as production cuts begin to reduce excess supply, lithium surplus would fall to 33,000 metric tons in 2025 from 84,000 metric tons in 2024. According to Chris Berry, president of House Mountain Partners, however, the behavior of the lithium price over the next year may be unpredictable. He said the following:
“Lithium price volatility is a feature of the energy transition and not a bug. You have a small but fast-growing market, opaque pricing, legislation designed to rapidly build critical infrastructure underpinned by lithium and other metals, and this is a recipe for boom-and-bust cycles demonstrated by extremely high and extremely low pricing.”
Our Methodology
For our list of the 12 biggest lithium stocks to buy, we narrowed down companies involved in lithium mining and supply, lithium-ion battery sales, or technologies related to battery operations. The names on this list are ranked in ascending order according to the hedge fund sentiments surrounding them, using data from Insider Monkey’s Q3 2024 database.
Why do we care about what hedge funds do? 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 laboratory technician carefully mixing chemicals in a laboratory.
FMC Corporation (NYSE:FMC)
Number of Hedge Fund Holders: 41
FMC Corporation (NYSE:FMC), founded in 1883 as an insecticide manufacturer, is an American chemical manufacturing company that has since expanded into other industries. FMC Corporation (NYSE:FMC) has spent decades developing and producing lithium amides, lithium alkoxides, lithium metal hydrides, alkyllithiums, and aryllithiums. These compounds are useful as reducing agents in the production of agricultural and pharmaceutical intermediates.
On January 21, Barclays analyst Benjamin Theurer upgraded FMC Corporation (NYSE:FMC) from Equalweight to Overweight, while maintaining a $65 price target. According to the analyst, the market expects an EV/EBITDA multiple of 9.3 times in 2025, based on Bloomberg consensus estimates, while the historical average for FMC is 12-13 times. Theurer provides a more optimistic assessment of the stock’s future performance, citing the historical multiple to suggest that the stock’s “normalized” pricing may exceed the current price target.
In the third quarter of 2024, FMC Corporation (NYSE:FMC) reported 12% organic sales growth and 9% sales growth. The company expects a 32% increase in EBITDA and a 19% increase in sales in the fourth quarter of the same year. By 2025, the company hopes to increase revenue by about 6%, at a potential cost of $200 million. As part of its ongoing innovation efforts, FMC plans to launch four new active ingredients and save $125 million to $150 million through restructuring by 2024.
Overall FMC ranks 2nd on our list of the biggest lithium stocks to buy according to hedge funds. While we acknowledge the potential of FMC as an investment, our conviction lies in the belief that certain 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 FMC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
