Lithium Americas Corp. (NYSE: LAC) is among the group of U.S.-based companies well-positioned to benefit if the President of the United States, Joe Biden, chooses to invoke the Defense Production Act (DPA) passed in 1950.
Market news is ripe that such an announcement is likely this week. The possibility that key battery materials like lithium, cobalt, manganese, and others will come under the purview of the Defense Production Act has sparked enthusiasm for Lithium Americas and other companies in the domain.
Impressively, shares of Lithium Americas rose 11.8% to close at $396.86 on Wednesday. In the extended trading session, the stock gained an additional 2%.
Other beneficiaries include Livent Corporation (NYSE: LTHM), up 4.1% in the normal trading session and 2% in the extended hours on Wednesday, and Piedmont Lithium Inc. (NASDAQ: PLL), up 0.5% on Wednesday.
Inside the Headlines
The federal law in discussion empowers the President of the United States to direct domestic companies to increase the manufacture and supply of materials and services. Such directives are intended to boost national defense.
Citing other sources, a Bloomberg report, dated March 30, 2022, revealed that the White House is planning to include battery materials in the list meant for the Defense Production Act. This move will solidify the supply chain needed for electric vehicles in the country.
Over time, the Biden-Government has expressed its eagerness to make the country a self-reliant producer of electric vehicles. Presently, the country is heavily dependent on imports of battery materials, especially from China.
Stock Rating
Recently, Katie Lachapelle, an analyst at Canaccord Genuity, reiterated a Buy rating on Lithium Americas but lowered the price target to C$50 from the previous C$54.
In U.S. Dollar terms, the present price target is $40.01, which mirrors upside potential of 8.56% from current levels.
Another analyst, Joel Jackson of BMO Capital, maintained a Neutral rating on Lithium Americas with a price target of C$30 or US$24.01 (34.87% downside potential).
LAC currently has a Strong Buy consensus rating based on eight Buys and two Holds. Lithium Americas’ average price target of $35.31 suggests 4.2% downside risk from the current level.
Over the past year, shares of Lithium Americas have surged 129.4%.
News Sentiment
Per the TipRanks tool, News Sentiment is presently Neutral for Lithium Americas based on four articles released over the past seven days. 100% of the articles on LAC have a Bullish sentiment, compared to the sector average of 59%.
Conclusion
Increasing the production of battery materials within the U.S. will have multiple constructive impacts. While the mining and materials industry will get a boost, enhanced manufacturing of electric vehicles domestically and the anticipated cut down in imports of battery materials will add new vigor to the country’s GDP.
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