The reason I chose these companies is due to their robust competitive advantages and wide moats in the lithium mining industry. These firms have established themselves as low-cost producers, leveraging economies of scale and favorable mineral deposit locations. Their operational strengths allow them to extract lithium in a cost-efficient manner, providing an edge over rivals.
Moreover, some companies have secured long-term supply agreements with major players in the electric vehicle (EV) and renewable energy storage markets. Such contracts ensure a steady stream of revenue and mitigate pricing pressures.
So, here are three of the most undervalued lithium stocks to buy in April.
Albemarle (ALB)
Since March, Albemarle (NYSE:ALB), saw its share price recover from a low of around $110 to $128, with a potential to reach higher levels. It trades at 9x earnings and offers a 1.27% yield.
I think ALB is undervalued because of its announcement regarding measures in January 2024 to adjust its growth investments and streamline costs, targeted to unlock over $750 million in cash flow in the near term. The company plans to reduce its 2024 capital expenditures to between $1.6 billion and $1.8 billion, down from approximately $2.1 billion in 2023.
For the fourth quarter and full year 2023, ALB reported mixed results. While full-year net sales hit a record high of $9.6 billion, a 31% increase from the previous year, the fourth quarter experienced a net loss of $618 million. However, this, in turn, has improved its valuation, making it one of those companies to consider.
Ganfeng Lithium (GNENF)
Ganfeng Lithium (OTCMKTS:GNENF) is one of the world’s leading lithium producers, providing comprehensive lithium products and solutions to the global market. China is the hub of lithium activity, and GNENF stock is at the heart of it.
Here’s why I believe GNENF is in the prime spot for a strong rebound.
In 2023, the company’s performance mirrored broader industry trends, with a noted decline in profit attributed to uncertainties around its Mexico project and higher operational costs. That scenario prompted a cautious stance from analysts, leading to a general recommendation to sell GNENF shares as of the beginning of 2024. Specifically, GNENF’s stock price saw a decrease from $3.81 at the start of the year to $3.35, indicating a 12.1% drop.
There’s some good news on the horizon. The company has been part of significant partnerships, including an expanded offtake agreement with Pilbara Minerals to supply an additional 100,000 tons of spodumene annually from 2027. It may also be undervalued from both a fundamental level and a macro level, as the Chinese economy continues to recover.
Frontier Lithium (LITOF)
Frontier Lithium (OTCMKTS:LITOF) is a smaller, pre-production company with ambitions in North America’s EV and battery sector. These pre-producers can sometimes hold the best opportunity for investors because they trade at very low valuations given their more speculative natures compared to more established companies.
In 2024, Frontier Lithium continues to focus on developing its PAK Lithium Project, aimed at establishing the first fully integrated lithium mining and processing operation in Ontario, Canada. Another significant development for Frontier Lithium in 2024 is the formation of a joint venture with Mitsubishi Corporation. The partnership underlines a mutual commitment to advance the PAK Lithium Project, with Mitsubishi initially acquiring a 7.5% stake in the project.
However, the kicker for me is that it projected a 24-year life for the PAK Lithium Project, with a post-tax NPV(8%) of $1.74 billion and an internal rate of return of 24.1%. That means its prospects are both accretive financially and lucrative from a partnership angle.
On the date of publication, Matthew Farley did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.