PLL - What Tesla Deal Means for Piedmont Lithium (PLL) Stock
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Tesla (NASDAQ:TSLA) is off to a rocky start in 2023, but it just secured an important three-year partnership. The electric vehicle (EV) producer has reached an agreement with Piedmont Lithium (NASDAQ:PLL) that will provide it with a key EV battery component.
Demand for lithium has spiked alongside the growing green energy boom. In fact, as InvestorPlace contributor Ian Cooper notes, demand has far exceeded supply. That trend isn’t likely to shift in the near future. However, this also means lithium miners have significant growth potential as the green energy space continues to expand. Partnering with an EV industry leader also means that Piedmont will have a clear advantage over its smaller competitors. PLL stock is falling this morning, but that has more to do with strong market volatility than the Tesla partnership news.
Let’s take a closer look at today’s new deal and what investors should be watching for.
What’s Happening With PLL Stock?
News of the partnership sent PLL stock up in premarket trading, although shares are now down 4% so far today. While the stock has fallen since markets opened, investors should be careful not to interpret this as anything more than a turbulent trading day. PPL could be back in the green well before markets close. After all, partnering with Tesla will help the company secure its place as a leader in lithium. Investors should regard the agreement as a ringing endorsement.
TSLA stock is experiencing a much worse trading day than its lithium partner, however. As of this writing, shares are down more than 12% and show no signs of turning around. But this is hardly a surprise. Recently, the company reported fourth-quarter deliveries short of estimates, even after analysts adjusted their expectations. JPMorgan also recently issued a bearish take on TSLA stock. Even an important partnership can’t boost shares in the face of so much bad news.
That said, this doesn’t mean the deal with Piedmont won’t be a boon for both companies. On the contrary, it could be exactly what Tesla needs to finally usher in a turnaround. Investor’s Business Daily reports that Piedmont will supply the EV producer with “125,000 metric tons of spodumene concentrate, or SC6, from its North American Lithium mining operation in Quebec.” The company will begin to deliver lithium in the second half of 2023 and continue to do so through 2025.
The Road Ahead
It’s no secret that Tesla has been plagued by the lithium shortage. In October 2022, CEO Elon Musk stated that supply issues were holding his company back, unveiling plans to build a lithium refinery in Texas. Since the CEO has become more concerned with Twitter than Tesla lately, procuring a partnership with an established lithium miner is a highly strategic move. This will likely help Tesla continue streamlining production in 2023 and recover the ground it lost in Q4.
Securing a source of lithium could give Tesla the edge it needs as competitors continue to close in on its market share. Regardless of what TSLA stock does, though, PLL stock should surely pull back into the green as markets adjust and recover.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.
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