We recently compiled a list of 10 High Growth Lithium Stocks to Invest In. In this article, we will look at where Tesla, Inc. (NASDAQ:TSLA) ranks among high growth lithium stocks to invest in.
Lithium Prices Drop but Demand Signals Long-Term Gains
Rio Tinto announced its acquisition of U.S.-based Arcadium for $6.7 billion, positioning itself as the world’s third-largest lithium miner. The deal comes while lithium prices are falling these days, which are driven by oversupply from China and a slowdown in EV sales, which has made lithium miners attractive takeover targets.
Despite current price drops, the company’s CEO is optimistic about long-term lithium demand, a sentiment shared by Frank Nicolich, CRU Group vice president of base and battery metals. In an interview with Julie Hyman and Josh Lipton of Yahoo Finance, Nicolich explained that while prices are low due to oversupply, mining deals like the one mentioned above are long-term investments.
He expects lithium demand to increase three to four times over the next decade as the transition to clean energy accelerates, making substantial new supply essential. Lithium is highly valued for batteries as it offers the right chemical and electrochemical properties. Although sodium-ion technology may eventually be an alternative, lithium remains universally used in all battery chemistries for now.
Regarding future lithium production, Nicolich pointed to Africa, especially the old tin mines, as a significant near-term source. South America remains a major player, while North America and Canada also have promising lithium deposits. However, U.S. production is currently small, with potential for growth if prices rise.
As lithium demand grows, Nicolich expects more acquisitions as miners seek to position themselves for the future. For investors, the lithium market is still developing. While futures markets for lithium are emerging, such as in China and potentially with the CME, investing in lithium is currently best done through miners rather than direct commodity investments.
We mentioned a similar long-term sentiment in our article about the biggest lithium stocks article posted last month. Here is an excerpt from the article:
“Despite challenges like pricing and demand headwinds in 2023, the U.S. and Canadian lithium sectors are set to make progress in 2024, with several construction projects potentially starting to boost domestic lithium supply. According to an S&P Global report, while the lithium market has seen slow activity and falling prices, especially in Asia, long-term demand fundamentals remain strong due to the global transition toward electric vehicles (EVs) and energy storage.
Even though lithium prices dropped in 2023 after reaching record highs in 2022, the long-term outlook for the EV market remains promising. According to the report, EV sales are expected to reach 30.81 million units by 2027, and lithium prices are expected to stabilize between $20,000 and $25,000 per metric ton in the coming years. Despite the industry’s cyclical nature, current pricing remains strong enough to attract investment, especially with regulatory support driving the EV transition in countries like Canada.”
Our Methodology
For this article, we used lithium ETFs to identify nearly 50 stocks and we narrowed our list to 30 companies with significant operations in the lithium and battery market. Next, we chose 10 stocks with double-digit 5-year compound annual growth rates (CAGR) in revenue (at least 10%). Our primary metric for listing the stocks was hedge fund sentiment and for the secondary one, mainly for the stocks not trading on NYSE or NASDAQ, we listed according to their average analyst price target upside. The hedge fund sentiment was taken from Insider Monkey’s Q2 database of 912 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).
Tesla, Inc. (NASDAQ:TSLA)
5-Year Revenue CAGR: 30.75%
Average Price Target Upside: 2.66%
Number of Hedge Fund Holders: 85
Tesla, Inc. (NASDAQ:TSLA) tops our list of high-growth lithium stocks as it continues to lead the EV and renewable energy sectors and is expanding both its production and innovation efforts. The company is investing $3.6 billion in a new Nevada battery factory to produce larger 4680 battery cells, which are essential for the Cybertruck that demands around 7 GWh of battery capacity annually.
In line with its vertical integration strategy, the company is also investing $1 billion in a Texas lithium refinery that will produce battery-grade lithium hydroxide using an environmentally friendly process. The refinery is expected to generate 50 GWh annually, which improves the company’s battery supply chain and cost efficiency.
Tesla (NASDAQ:TSLA) also leads in EV infrastructure, with its Supercharger network, which surpasses 50,000 stations worldwide and in turn eases the range anxiety for long-distance and urban driving. The company is actively opening its Supercharger network to other automakers and has introduced the North American Charging Standard (NACS), which aims to set industry-wide charging standards.
The latest in the company news is its “We, Robot” event on October 10. The event received mixed reviews from the market. While a number of analysts and experts remained unimpressed by it, many others see a lot of potential. Wedbush reaffirmed its Outperform rating and a $300 price target for Tesla (NASDAQ:TSLA) following the event, as reported by The Fly on October 11.
The firm expressed strong optimism about the company’s advancements in autonomous technology and the Cybercab. The analysts were particularly impressed by the Cybercab, and expect that its pricing could help create a fleet business potentially generating $10 billion annually as it scales in the coming years.
However, Wedbush noted that challenges, including regulatory approval, insurance, and specifics regarding the Cybercab’s launch, will need to be addressed as the company moves forward in transportation innovation.
Analyst Dan Ives said that Tesla (NASDAQ:TSLA) “should have spent more time on details around this strategic autonomous vision.” However, the firm expressed strong disagreement with the idea that the event was disappointing. The firm argues that seeing the Cybercab in person and observing significant advancements in Optimus, which they had hands-on experience with during the event, was impressive.
Additionally, Cathie Wood’s Ark Invest has been bullish on the company stock for a long time and has been the most prominent shareholder of the company according to Insider Monkey’s Q2 database. The firm owned 5.3 million of the company stock, worth $1.05 billion in the quarter. More recently, she purchased approximately 12,700 shares of the stock on October 11.
ClearBridge Investments stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q2 2024 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) manufactures electric vehicles, related software and components, and solar and energy storage products. The stock contributed as Tesla continued to drive vehicle manufacturing costs lower, accelerate the launch of new models, and invest heavily in its lucrative AI initiatives. Shareholders reaffirmed the CEO’s compensation plan, alleviating personnel and legal uncertainties. Despite material operational complexities resulting in significant shutdowns of key manufacturing facilities and lower sales volume, Tesla presented better-than-expected margins in the quarter. It expects to launch a lower cost model as soon as late 2024, which should result in accelerated revenue growth, reduced manufacturing costs, and increased factory utilization. The company continued to advance its autonomous driving capabilities, expanding its already significant data centers and developing its humanoid robot Optimus. These investments increased confidence in the attractive growth opportunities that remain ahead.”
Overall TSLA ranks 1st on our list of high growth lithium stocks to invest in. While we acknowledge the potential of TSLA 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 TSLA but that trades at less than 5 times its earnings, 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 on Insider Monkey.
