Lithium stocks have big potential right now, Deutsche Bank says. Here are its top picks

Published Wed, Mar 16 202211:13 PM EDTUpdated Thu, Mar 17 20223:48 AM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Analysts at Deutsche Bank say lithium — a key component of electric vehicle batteries — could provide a key investment opportunity right now, naming three stocks with "minimal risks" and no direct exposure to Russia. The bank's analysts, led by Corinne Blanchard, described the current investment landscape as a "red market situation." "We believe that lithium stocks present minimal risks, with no direct exposure to Russia, and actually could offer an investment opportunity in markets being largely impacted overall," the analysts said in a research note published March 13. It comes as Russia continues its bombardment of Ukraine , causing market volatility across asset classes. The bank picked Lithium Americas , which operates in the United States and Argentina, as an "attractive entry point for investors to gain exposure to the strengthening lithium/EV thematic." Analysts also noted its forthcoming Pastos Grandes project, which has gained approval for the construction of a plant that can produce 24,000 tonnes of lithium carbonate per year — enough to power about half a million EVs. Deutsche Bank has a price target of $34 on the stock, which closed at $26.87 on Wednesday. U.S. chemicals company Albemarle is also buy-rated by Deutsche Bank because of two "world-scale" projects due this year and the next. The bank's price target is $250, compared to Wednesday's close of $190.85. Finally, the analysts picked Chilean firm SQM — Sociedad Quimica y Minera de Chile — as a buy for its expansion plans. "We identify a clear growth path ahead with upside in lithium pricing for 2022 and 2023 in our forecasts," the analysts wrote. Deutsche Bank's price target on the stock is $91. It closed at $73.03 on Wednesday. "None of our companies under coverage have direct Russia exposure (we note SQM has a fertilizer distributor in Russia, but with insignificant volumes). In terms of market and industry, while Russia is a large commodity player (6% of world aluminum output, 8% of nickel), there is no direct exposure to lithium," the bank added. These picks come as automakers ramp up EV production. On Monday, Ford and Volkswagen announced an expansion of their collaboration to manufacture 1.2 million EVs over six years, starting in 2023. Deutsche Bank noted potential risks for the auto industry, saying it could face further supply chain disruptions and higher battery prices. The bank said it is monitoring the impact of the Russia-Ukraine conflict on stocks. — CNBC's John Rosevear contributed to this report.

A worker assembles Volkswagen ID.5 electric cars at the company's Zwickau plant on Jan. 27, 2022, in Germany.

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