Piedmont Lithium stock is the IBD Stock Of The Day as it rebounds from a key technical level while rival Livent soars on its strong earnings and outlook.
In 2020, shares of Piedmont Lithium soared on a supply deal with Tesla. Prices for lithium, a key battery material, have skyrocketed as more automakers phase out gas and diesel cars in a switch to electric vehicles, or EVs.
A pre-revenue company, Piedmont has struggled to clear regulatory hurdles to begin lithium production. Meanwhile, Elon Musk has suggested that Tesla could get into the lithium mining business.
But Wall Street sees Piedmont on the cusp of profitability, though that assumes production begins. And in April, IBD flagged Piedmont stock as one to watch as it hit an important technical milestone — its Relative Strength (RS) Rating climbed into the 90-plus percentile. Its RS Rating is currently 94 out of 99, meaning it has outperformed 94% of all stocks in IBD's database over the past year.
On Wednesday, Livent, a more established lithium stock, skyrocketed 30% on better-than-seen earnings and higher outlook. Industry giant Albemarle is on deck to report after the close. ALB stock surged 9.3%.
Tesla stock belongs to the IBD Leaderboard, a curated list of stocks with the most potential for big gains.
Lithium Prices
In the past year, lithium prices skyrocketed as EVs that use lithium-ion batteries proliferate. But a global shortage of lithium metal could upend the great EV race, as legacy automakers challenge Tesla's dominance in electric cars.
Hot demand and soaring prices have sent lithium stocks and related plays on a wild ride. Besides PLL and ALB, those stocks include Lithium Americas, MP Materials and Sociedad Quimica y Minera de Chile. Rare-earths play MP Materials reports Thursday.
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Piedmont Lithium Stock Eyes Buy Point
Shares of Piedmont Lithium popped 4.1% to 70.37 on the stock market today. PLL stock rebounded off the 50-day amid a strong post-Fed market rally and as Livent stock soared on powerful earnings and strong guidance.
Investors could buy PLL stock now, off the 50-day average. But a move above 72 would also break a short trendline.
Since peaking at 79.99 on March 30, Piedmont Lithium stock has consolidated. In another week or so, it could have a proper base with an 80.09 buy point. Investors already could view the recent action as a handle on a consolidation going back to March 2021.
In another positive sign, PLL stock sits just below the 21-day exponential moving average, whereas the major stock indexes are well below the 50-day and 200-day lines amid weak earnings outlooks, the Russian invasion, inflation and rate hikes.
The relative strength line for Piedmont Lithium stock is back near record highs after a slide in the latter half of 2021, according to MarketSmith chart analysis. A rising RS line means that a stock is outperforming the S&P 500.
Piedmont is a startup company looking to generate revenue and earnings. As a result, it earns a dull IBD Composite Rating of 66 out of 99. This rating combines key fundamental and technical metrics in a single easy-to-use score.
Piedmont Lithium Earnings
Given the lack of earnings, the lithium play bears the lowest-possible EPS Rating of 1 out of 99. But profitability looms.
In all of 2022, analysts polled by FactSet expect Piedmont to narrow losses to $1.12 per share from a loss of $1.48 in 2021. However, they forecast Piedmont will swing to earnings of $3.58 a share in 2023 as revenue surges 660% to $133 million.
Piedmont Lithium stock shows six quarters of rising fund ownership, according to the IBD Stock Checkup tool. More than 100 funds owned PLL stock as of March, more than doubling from June 2021.
Tesla Eyes Lithium Mining
Though Piedmont is seen as a promising lithium play, it's not all roses.
Last August, Reuters reported that Piedmont Lithium would indefinitely delay the first lithium shipments to Tesla.
The contract called for Piedmont to begin supplying Tesla sometime between July 2022 and July 2023 from a North Carolina lithium mine. But the mining operation ran into local opposition, Reuters said.
Just weeks ago, in April, CEO Elon Musk tweeted that Tesla could get into the lithium mining and refining business, according to Barron's. Musk added, somewhat cryptically, "we have some cool ideas for sustainable lithium extraction."
But any new lithium project would take years in a best-case scenario to deliver lithium.
