In the wake of a significant downturn in lithium stocks following the peak in lithium prices observed in November 2022, investors are presented with a compelling question: is now the right time to consider these stocks?
Recent market trends have seen a 70% reduction in lithium prices, directly impacting key players in the industry, with SQM, ALB, LTHM, LIT, and BATT experiencing up to 46% declines in 2023.
Notably, SQM, the top loser this year, has captured the attention of financial markets analyst Saqib Iqbal from Trading.Biz, who identifies it as a potential opportunity despite its 40% loss in 2023.
Iqbal highlights several key factors that contribute to SQM’s strength:
- Market capitalization: $12.56 billion
- P/E ratio: 3.6 (indicating undervaluation)
- Dividend yield: Above 16%
- Annual revenue growth: 63% in the last twelve months until Q2, with a gross profit of 49%
While year-over-year profits may have declined, the sustained demand for lithium, especially in electric vehicle batteries, suggests a possible long-term uptrend for lithium stocks. The current market conditions, with SQM trading near 52-week lows and its 52-week high at $110, present an intriguing opportunity for potential investors.
Furthermore, the lithium stocks index appears to have stabilized around $138, indicating a potential initiation of an uptrend.
The upcoming SQM earnings report on November 15th, 2023, will provide insights into the company’s performance. Although no significant positive differences are expected, any deviation from estimates could attract buying traction.
From a technical standpoint, SQM’s stock reflects a strong bearish trend, approaching key levels around $41. Despite trading below key Simple Moving Averages (SMAs) on the weekly chart, signs of seller exit are apparent as bearish volumes decrease.
This suggests a potential buying zone around $41, with upside targets at $61, $80, and $100.
SQM weekly chart (Source: TradingView)
In conclusion, while the current state of lithium stocks may seem challenging, astute investors are urged to consider the unique opportunities presented by the undervalued SQM stock, backed by solid fundamentals and the broader industry’s long-term growth potential.