Why Is Lithium Americas Stock So Cheap?

Andrew Willis: New subsidies for products that run on locally sourced lithium in the U.S. have investors eyeing companies like Lithium Americas Corp. LAC, sending stocks rallying in the wake of the Inflation Reduction Act.

The extent of the lithium opportunity, however, may still be underappreciated by investors, as senior equity analyst Seth Goldstein sees the local lithium market being undersupplied until 2030 as we stand at only one extraction operation in the U.S., with Albemarle. And globally, Lithium Americas is leaning on multiple projects in places like Argentina to supply demand we predict will grow 20% annually until the end of the decade.

Lithium Americas is developing a project in Nevada, which could increase U.S. output nearly fiftyfold if it can move forward, but it currently faces legal opposition from environmental activists. But we think the company will prevail. After all, the company aims to produce enough lithium every year for nearly 5 million electric vehicles.

For Morningstar, I'm Andrew Willis. Check out Morningstar.ca to watch Why Is Air Canada Stock So Cheap?