John Zechner
Lithium Americas Corp
LAC-T
DON'T BUY
Oct 04, 2021
Lithium. The impact of the use in batteries is causing it to grow substantially. There could be supply issues in the short term. He'd go to the battery supply rather than a pure play. These high growth industries with high valuations are the most at risk in a market that is worried about short term interest rates and rising inflation.
It's a "story" stock. Has no real fundamentals. He models $4.42, so this is 89% overvalued. If this breaks below $32, it will slide and he would sell. He doesn't believe the hype or Elon Musk about lithium.
The challenge with lithium is where it's located and who contols that. Namely, Chile just announced it will nationalized lithium (in the next few years). Yes, you want to be part of the EV play, but base metals aren't the way to do it. Albemarle, for instance, is too volatile.
There's intense interest in lithium as the market seeks a reliable supply of it to help build EVs. LAC is a mid-cap, so it has some stability. Shares have been bouncing with a decent base at $25. Is set up for a near-term rally. Have a decent balance sheet.
In the next 10-20 years we won't have enough copper or lithium as we electrify the world. The market for lithium has changed in the past 5 years. This is a long-term investment, but will see bumps along the way. Buy a little and monitor it.
Lithium is becoming more relevant with EVs, it will just take some time. Takes a lot of capital up front, to mine, and to sell. Demand/supply cycles are not always clear cut.
Small commodity, growing a lot. Under pressure, because lithium is under pressure with new mines coming on. It will come down to economic execution. Good assets. Be cautious in short term, as momentum is against it. Sub-$15 is a good level.
There's lithium everywhere. It's going to be an opportunity for EVs. But if you look at the price of a giant like ALB, the shares have come down, and that's just gravity taking hold of high valuations. If you need to sell, sell. Restructuring restricted share trading earlier this week.
He'd probably take the North American play. Lithium market is on the verge of becoming over-, not under-, supplied. Argentinian assets are higher quality, buy still thinks NA assets will gain more favour.