Is It Time To Invest In These 2 Companies Critical To EV Industry Supply Chain?

Electric vehicle stocks have been some of the hottest investments in the market in the past couple of years, as investors anticipate a multi-decade boom in EV sales. On Tuesday, one Wall Street analyst upgraded a pair of stocks that are highly exposed to the EV supply chain.

The Analyst: Bank of America analyst Matthew DeYoe upgraded Albemarle Corporation (NYSE: ALB) from Underperform to Neutral and raised his price target from $220 to $230. DeYoe also upgraded Livent Corp (NYSE: LTHM) from Underperform to Neutral and raised his price target from $22 to $26.

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The Thesis: In the upgrade note, DeYoe said lithium stocks Albemarle and Livent are no longer overvalued after both stocks significantly underperformed the S&P 500 and their materials sector peers in recent months. At the same time, the lithium market has improved, with prices rallying between 12% and 110% depending on the benchmark used.

After the recent pullback, DeYoe said Albemarle and Livent have a more balanced risk-return profile.

"We remain constructive on the lithium market over the medium term as well, though...we do see some risks to supply balancing or shifting to net long in the middle of the decade," he said.

However, he remains cautious on the two lithium stocks in the near-term ahead of upcoming resource data from both companies, that DeYoe said could materially impact the value proposition for the stocks.

Benzinga’s Take: There’s no question there will be a massive boom in EV battery demand over the next 20 years. The only question for investors is just how much of that boom is already priced into Albemarle and Livent, which are both already trading at more than 7.7 times sales.