LAC - Lithium Americas (LAC) stock forecast: follow the trend for now
2024-01-25 08:00:19 ET
Lithium Americas (NYSE: LAC) stock price has been in a freefall amid rising concerns about electric vehicles and lithium demand. The stock plunged to a low of $4.40 this week, its lowest point since September 2020. It has slipped by over 81% from its all-time high, which it reached in November 2021. Its valuation has slipped to over $730 million.
Lithium price is crashing
Lithium and other battery metals like nickel and lithium have been in a strong downward trend amid rising concerns about the EV industry and overall demand. Most investors are worried that while EVs are growing, the momentum has faded. For example, Tesla, the biggest EV company in the world, announced weak earnings and warned that demand was waning.
This view is also supported by the performance of EV stocks, which have tumbled this year. Companies like Rivian, Nio, Lucid Motors, and Mullen Automotive have plunged by more double digits in the first few days of the year.
Meanwhile, there are signs that the world is awash with lithium as most countries take advantage of the transition to EVs. This includes countries like Australia, Chile, China, Argentina, Brazil, and even Zimbabwe.
There are signs that the crashing lithium price is hurting companies in the industry. For example, Core Lithium, an Australian company, said that it would cut a number of roles across the organisation. Further, Pilbara Resources warned that it would suspend its dividend to preserve cash.
Other companies like Liontown and Albermarle have also changed their strategies. This means that Lithium Americas will also be under pressure as the company continues building its Thacker Pass project in Nevada.
The challenge for the company is that it needs to spend millions, if not billions, to develop this project before it comes online in 2026. And in many cases, such complicated projects tend to face delays, which could hurt its profitability.
The only positive thing is that many companies in the lithium industry are now cutting output as prices crash. In the future, this could help to stabilize the industry. However, for this to happen, countries will need to come up with an OPEC-like structure.
Lithium Americas stock price forecast
The weekly chart shows that the LAC share price has been in a strong downward trend in the past two years. It recently crossed the important support at $7.27, its lowest swing on May 10th, 2021. The shares have also remained below the 50-week and 100-week Exponential Moving Averages while the Relative Strength Index (RSI) has continued slipping.
Therefore, in this case, I believe that following the trend makes sense. As such, I suspect that the shares will continue falling, with the next point to watch being the psychological point at $3.50. A strong bullish breakout will be confirmed if the stock moves above the resistance at $7.27.
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