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The lithium industry has encountered a significant downturn, with Bank of America's senior commodities strategist, Michael Widmer, slashing the price forecast for lithium-rich spodumene concentrate by a dramatic 63% for this year, and by 34% for 2025. Citing a backdrop of softer electric vehicle (EV) demand, Widmer lowered his 2024 price target to $650 a tonne from the previously anticipated $1,763.

“Operators have been reluctant to curtail production, the project pipeline is well filled, and we continue to expect very high surpluses,” wrote Widmer. "This should keep the pressure on prices for now." The analyst added, “Eventual announcements of lithium production cuts will be key to a price rebound.”

As the industry navigates an oversupply, lithium stocks have been delivering some significant volatility for investors this month. Here's a closer look at what's been driving the big price swings in names like Albemarle (ALB) and Lithium Americas (LAC), and what Wall Street analysts are expecting next.

Lithium Stock #1: Albemarle Corp (ALB)

Albemarle Corporation (ALB) is a global specialty chemicals company with a strong focus on lithium (LMJ24), bromine, and catalysts. The company operates globally, with production facilities and resources across various regions, including the U.S., Chile, Australia, and China.

As a dividend aristocrat, Albemarle pays shareholders a quarterly cash dividend of $0.40 per share. The stock yields 1.28%, backed by 29 years of consistent dividend growth.

ALB stock has been a long-term underperformer, however. The shares are off 42% over the past 52 weeks.

In February, Albemarle didn't just meet expectations for Q4 2023; it left them in the dust by reporting EPS of $8.62 on revenue of $2.36 billion. Later that month, however, the company lowered its lithium demand forecast, and CEO Kent Masters noted that Albemarle was working to “bolster the balance sheet.”

To that end, March brought news that Albemarle decided to go big with a $1.75 billion stock offering, and days later upped the ante to $2 billion. Although the move will shore up Albemarle's balance sheet, investors were clearly unhappy with the dilution; ALB fell nearly 18% in a single session on March 5, and set a new three-year low in the process.

Despite broader challenges, analysts are feeling pretty good about Albemarle's future, with the consensus rating at “moderate buy.” Among 22 analysts offering recommendations, 10 advocate for a “strong buy,” one suggests a “moderate buy,” nine advise a “hold,” and two opt for a “strong sell.” The mean target price for ALB is set at $156.74, which would be a healthy 30% climb from its current price.

Lithium Stock #2: Lithium Americas Corp (LAC)

Lithium Americas Corp. (LAC) is a Canada-based resource company that is focused on developing lithium projects. The company's primary focus is the Thacker Pass project in northern Nevada. Notably, LAC shareholder General Motors (GM) has exclusive rights to all of Phase 1 for 10 years, with an option to extend for an additional five years.

LAC stock has also underperformed on a YTD basis, off 13.1% since the start of the year.

However, LAC popped higher this month after bagging a conditional commitment from the Department of Energy for a whopping $2.26 billion loan to develop Thacker Pass. This project isn't just any lithium deposit; it's the largest in the U.S., and a cornerstone of the Biden administration's plan to boost domestic production of critical minerals for the energy transition.

LAC was up more than 33% intraday on the news, before eventually settling for slimmer gains. The stock is now back below its pre-loan levels, though it's still up 20.8% over the past month.

On the earnings front, Lithium Americas is expected to swallow widening losses through fiscal 2025. However, analysts remain mostly optimistic, with 5 out of 7 analysts calling the stock a “strong buy,” and the mean price target set at $10.25 - a premium of 84.3% to Tuesday's close.

That said, LAC stock fell on Monday after Scotiabank analyst Ben Isaacson cut the stock to “sector perform" with a $7 price target, and warned of a $300 million funding gap for Thacker Pass Phase 1 - equivalent to roughly one-third of the company's market cap.

On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.