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A big part of the electric car story is lithium. The element is a key material used in the manufacture of lithium-ion batteries. You could look at a company like Piedmont Lithium (NASDAQ:PLL) as a play on the surge in electric car popularity. But Piedmont Lithium stock is bigger than just electric cars.
Everything from smartphones to laptops and renewable energy projects rely on lithium-ion batteries. That makes PLL a smart bet on a green future.
The price of lithium has been falling over the past several years as more mining facilities come online. The novel coronavirus pandemic has been blamed for low demand in 2020.
The combination of increased production and lowered demand has resulted in record low prices for lithium in October. That low price — along with the sale of $57.5 million in American depository shares and a big EV supply contract— have combined for a tumultuous month for Piedmont Lithium stock.
After a slump that’s lasted three weeks, PLL is looking attractive.
The Importance of Lithium
How important is Lithium these days? It’s critical. Lithium stocks have become hot commodities.
As recently as two decades ago, the primary use of the light, silver-white element was in pharmaceuticals and to help remove impurities during the refining of other metals. That all changed with the development of the lithium-ion battery.
In 2019, the Nobel Prize in Chemistry was awarded to the team that developed the lithium-ion battery. The Nobel committee highlighted the role Lithium ion batteries will have as countries move away from fossil fuels.
Rechargeable lithium-ion batteries enabled the mobile communications we take for granted today, and they are powering the electric car revolution. Lithium is much lighter than the lead and nickel-based batteries used in the past.
Lithium-ion batteries also offer a much higher energy density. The combination of lighter weight and greater energy density means small, lighter batteries that last far longer on a charge. These modern batteries also use less toxic metals than lead-acid and nickel-cadmium batteries did.
Lithium-ion batteries are also going to be critical in the adoption of clean energy sources like solar and wind. These sources are zero-emission, but generation isn’t available 24/7. To fully utilize generating capacity, energy needs to be stored in batteries for downtime.
Amanda Morris is an associate professor of chemistry at Virginia Tech. She points out the importance of lithium-ion batteries in the pursuit of green energy, saying: “Batteries are going to be what allows us to tap into other renewable resources.”
Given the importance of lithium — a relatively rare element — an investment in Piedmont Lithium stock seems like a smart bet.
Tied to Success of the Electric Car Industry — and One Manufacturer in Particular
Piedmont’s relationship with the world’s biggest and best-known electric car manufacturer has been both a blessing and a curse.
In September, Piedmont announced it had inked a deal to supply Tesla (NASDAQ:TSLA) with spodumene concentrate (lithium ore) from its North Carolina operations. The deal guarantees Piedmont a fixed price for five years, with an optional five-year extension.
The market reacted strongly to the news, but not in a positive way. Concern about having 10-20% of the company’s total revenue tied to this one deal (with an often controversial customer) drove down Piedmont Lithium stock. The day after the deal was announced, PLL shares were down 31%.
Bottom Line on Piedmont Lithium Stock
There are factors that investors need to be aware of before plunging into the lithium market and considering a company like Piedmont. One current worry is that global lithium prices have been falling as more mining facilities come online.
However, it’s hard to look past the sheer demand for the material. There may be a surplus at this moment in time, but with the global energy storage market projected to be worth $546 billion by 2035? That is a lot of lithium-ion batteries. And that means a huge demand for lithium. Which means the current low prices for lithium aren’t going to remain low forever. Despite its slide through October, PLL seems well-positioned for long term growth.
Not convinced? I’m not the only one who has a bullish take on PLL. The analysts tracked by the Wall Street Journal who cover Piedmont Lithium stock have it rated as a consensus buy. Their average 12-month price target is $37.35, offering well over 70% upside.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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