American Lithium (LI) forecast: can the share price recover?
American Lithium (LI), a Canada-based exploration stage company involved in lithium and uranium rallied just shy of 500% from the start of the year to its all time high in mid-November. However, the share price was unable to hold onto those gains and has entered into a bear market, dropping over 25% across the past 3 weeks.
What’s been driving this elevated level of volatility in American Lithium? Read on for the latest American Lithium stock news and where analysts see the share price heading over the coming year.
American Lithium stock price history 2021
The American Lithium share price started 2021 at just $1.20, before soaring 250% higher to $4.21 on 10 February. The spike higher was short lived and the price quickly started moving lower again, heading towards around $1.60.
The share price rally took off in earnest in mid-August surging from $1.60 to an all-time high of $6.25 in the space of three short months.
However, the price was unable to sustain this level and lost a quarter of its value over the past three weeks. At the time of writing the American Lithium share price trades around $4.50.
Sector gains send LI to its all-time high
The electric vehicle (EV) revolution is the biggest change that the vehicle industry has seen in over a century after Ford invented the assembly line in 1913 that revolutionised car production.
Fast forward 100 years and Tesla’s rise has encouraged automobile makers to shift their focus towards producing EVs. Major car manufacturers such as General Motors, Volvo, Ford, Honda and BMW are increasingly EV enthusiastic.
And it’s not just car manufacturers. Governments across the globe are also spending huge sums of money to boost EV sales and on EV infrastructure in a bid towards a greener and more sustainable future.
Batteries are a key part of the picture, as the shift towards EVs grows. EV producers need a steady supply of lithium carbonate to keep up with huge and growing demand. This seismic shift towards EVs has boosted demand for lithium sky high. The EV revolution has literally turbocharged lithium prices and also lithium producers.
According to a report by MarketsandMarkets, the global lithium battery market is forecast to grow from $41bn in 2021 to $116bn by 2030. It is expected to grow at a compound annual growth rate of 12.3% from 2021 to 2030.
The booming demand for lithium goes beyond EVs. The mineral is also used in advanced robotics. It is predicted that the market for industrial and non-industrial robots will grow by $132bn in 2021 to $209bn by 2026.
Renewables use lithium, and the market is expected to continue growing by around 50% over the next five years. Use in electrical devices, such as tablets and laptops, is also expected to continue growing strongly.
As a result of the surge in demand for lithium, producers have also, unsurprisingly, had a solid run up over 2021. American Lithium is one such company that has benefitted from the surge in lithium prices in addition to strong operational progress.
American Lithium has managed to strengthen its cash position to CAD$50m and raised in excess of CAD$60m in capital this year. As a result, the company is well placed to push ahead with all three of its projects: the flagstone TLC in Nevada, and Falchani lithium and Macusani uranium in Peru. Both Nevada and Falchani are advancing towards production.
Falchani is further ahead in the development cycle. This is partly owing to how long it takes to get a permit in the US. Management forecast that Falchani will be feasible ahead of TLC. That said, they also acknowledge that the political narrative in the US is changing, amid a move towards a more pro-green, pro-mining stance. Currently, the US is significantly behind China in its bid to supply lithium domestically. Therefore, the industry in the US could start to see a change now, to speed up permitting and processes in order to play catch up with China. However, this hasn’t been seen yet.
Meanwhile, Peru brings good geographical diversity to American Lithium. Though it also brings some jurisdictional risk, which was highlighted in a case between the Peruvian government and American Lithium just last month. Whilst American Lithium won the case and the appeal, the risk hit the share price hard across November, sparking the selloff in the stock.
Why did the share tumble in December?
The sell off in December wasn’t just American Lithium, but rather a broader sell off in the sector and the wider market. Concerns over the new Covid strain, Omicron, hit sentiment, denting demand for riskier assets such as lithium exploration mining stocks. The rapid spread of the variant has unnerved investors who are waiting for further information over its severity and whether it could evade current Covid-19 vaccinations.
Whilst this doesn’t have a direct link to lithium, the fear is that global growth could slow, hurting EV sales and simultaneously aggravating the supply chains further.
American Lithium fell by more than the broader market on fears that a tougher economic environment stemming from higher interest rates and another Covid-induced slowdown is likely to hurt the speculative stocks more than other majors.
Where next for America Lithium – the technical picture?
American Lithium’s share price rallied from 1.60 on 23 August to an all-time high of 6.25, before rebounding lower off this resistance.
The fall lower has broken below the 20-day simple moving average (SMA) but found support above the key level of 4.20, the February high.
The relative strength index (RSI) has moved into bearish territory below 50 but remains above the oversold level of 30. Therefore, there could be more losses to come.
Strong support can be seen at 4.20, the February high, and at 4.09, the 50-day SMA. A break below this level could negate the up trend.
It would take a move below 3.30 the October high for sellers to gain traction.
Should support at 4.20 hold, the price could look to rebound back up towards 5.18 the 4 November high.
Where is American Lithium heading? The expert’s view
So after surging 260% so far across the year is American Lithium stock a buy, sell or hold? Is there more upside or will the newly entered bear market continue to run?
In her American Lithium stock analysis, Fiona Cincotta, senior market analyst at City Index, is upbeat regarding the outlook of the stock as long as it remains above the 4.20/4.10 support level. She says:
According to MarketScreener just two analysts have issued ratings on American Lithium over the past 12 months. One of them issued a buy rating and one of them issued an outperform rating. The result is a buy consensus rating. The average one-year Tilray share price forecast is CAD$8.25. The high price target is set at CAD$9.00, while the low is at CAD$7.50.
At the time of writing, 6 December, according to the American Lithium Corp stock price forecast on algorithm-based prediction website Wallet Investor, the share price was expected to rise over the coming years. The website’s American Lithium share price prediction for the end of 2022 was at 6.07, for 2023 at 6.95 and for 2024 at 7.95.
According to algorithm-based forecast website AIPickup, the American Lithium stock price target for December 2022 is lower at 2.76 and then 2.14 by the end of 2023. However, the service then predicts that the share price will start to rise to 2.29 by the end of 2024 and 2.39 by the end of 2025.
American Lithium stock forecast (2025 to 2030)
Looking further ahead, Wallet Investor’s American Lithium stock value for the end of 2025 was 8.90, rising further to end November 2026 at 1.12. Meanwhile, AI Pick up sees the share price rising to 2.61 in 2030 and then rising to 3.27 in a decade’s time.
Is American Lithium stock a buy?
There is no doubt that the demand for lithium is growing as the EV revolution takes place, However, this does not automatically mean that American Lithium is a buy. According to the analysts covering the stock it is a consensus buy rating. On the other hand, AIpick up sees volatility in the share price.
Will American Lithium stock go up?
Whether American Lithium goes up depends on several factors, including the demand picture and the price of lithium, American Lithium’s ability to raise finance and the broader risk sentiment in the market among other factors. The two analysts covering the stock forecast that prices may rise.
However, analysts’ predictions can be and have been wrong. Always do your own research into a stock and remember to never invest more money than you can afford to lose.
Why is American Lithium stock up?
American Lithium has benefitted from the surging price of Lithium, a key component for EV batteries, across the year. However the price has come under pressure more recently amid an ongoing legal battle with the Peruvian government and as Omicron fears rise, hunting the sector as a whole.