The battery industry is at the forefront of the transition to sustainable energy, with its role in storing and managing energy from renewable sources. Consequently, the U.S. government has pledged significant funding to fuel innovation and boost production capabilities within the battery sector. Pure-play lithium producer Lithium Americas (NYSE:LAC) is in good position to participate in the expanding market and see significant growth.
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With an increasing demand for electric vehicles, the expected growth in lithium-ion battery demand is soaring, with an estimated compound annual growth rate (CAGR) of around 20.3% from 2024 to 2030. Lithium Americas stock is down over 32% year-to-date and trades toward the bottom of its 52-week price range, suggesting a potential value play for patient investors.
Lithium Americas’ Exposure to Thacker Pass
In October 2023, Lithium Americas split into two publicly traded entities — Lithium Americas (Argentina) Corp. and Lithium Americas, solely focused on guiding the Thacker Pass project to fruition.
Thacker Pass, located in northern Nevada, is recognized as the largest known Measured and Indicated (M&I) lithium resource in the U.S. Construction was initiated in early 2023 with the intention to commence production by 2027. For this reason, the company has attracted a $650 million investment from General Motors (NYSE:GM) to advance the project, enabling the production of up to 1 million EVs utilizing GM’s Ultium battery cells annually.
Further, the company has secured a conditional commitment for a $2.26 billion loan from the U.S. Department of Energy to help facilitate the Lithium Technical Development Center in Reno, Nevada. The center is focused on producing battery-grade lithium carbonate by leveraging a continuous production process.
Lithium Americas Financials & Outlook
The firm reported a sum of around $147 million in cash and cash equivalents for the first fiscal quarter 2024. Later, on April 22, 2024, the company finalized an underwritten public offering. This involved offering 55 million common shares at an issue price of $5.00 per share. This endeavor successfully generated a gross aggregate amount of $275 million, which resulted in net proceeds approximating $263 million for the company.
This public offering and the Department of Energy (DOE) Loan met the prerequisite conditions for closing the General Motors investment. Simultaneously, the revenue from the public offering and funds from General Motors are projected to satisfy the financial conditions required to complete the DOE $2.26 billion Loan Conditional Commitment. These financial resources are expected to be directly utilized to fund Thacker Pass’s Phase 1 construction capital expenditures.
Is LAC Stock a Buy?
Analysts following the company have been cautiously optimistic about the stock. Canaccord Genuity analyst Katie Lachapelle, a five-star analyst, recently reiterated a Buy rating with a $10.27 price target, citing the company’s recent financial developments and attractive price relative to upside potential.
Lithium Americas Corp. is rated a Moderate Buy based on the recommendations and price targets set by seven Wall Street analysts over the past three months. The average price target for LAC stock is $7.57, representing an upside of 78.12% from current levels.
The stock had been trending up this year until the company announced the public offering of shares, after which the share price dropped roughly 20%. It continues demonstrating negative price momentum, trading below its 20-day (4.67) and 50-day (5.15) moving averages.
Final Analysis on LAC
With GM and the DOE’s support to help fund production from the largest source of lithium in the U.S., Lithium Americas is primed to participate in the strong projected growth of the lithium market. Production will take some time to come online, and the share price could certainly go lower from here. However, these levels will likely be seen as a value-oriented entry point for patient investors with a long-term outlook.