6 Undervalued Lithium Stocks to Invest In

As the global push towards decarbonization accelerates, lithium has emerged as one of the most vital resources for a cleaner future. With its indispensable role in battery technology, especially for electric vehicles (EVs) and renewable energy storage, lithium demand is forecast to outstrip supply for years to come. Despite the recent price corrections and market jitters, we believe that some overlooked lithium stocks offer a compelling opportunity for investors who understand the broader context.

We’re not talking about the flashy names that everyone knows. We’re talking about undervalued players, companies with solid fundamentals, strong growth potential, and operations aligned with the lithium megatrend. So, what are the best undervalued lithium stocks to invest in right now?

 

Why Lithium Still Matters

Lithium is at the heart of the global energy transition. From EVs to energy storage systems and even consumer electronics, lithium-ion batteries remain the gold standard. According to the International Energy Agency (IEA), demand for lithium could grow by over 40 times by 2040 compared to 2020 levels.

Despite the strong outlook, lithium prices fell sharply in 2023, leading to a sell-off in lithium stocks. But savvy investors know that markets often overcorrect. We’re seeing that play out in real time, making this the perfect moment to reassess beaten-down lithium companies that could bounce back stronger.

 

What Makes a Lithium Stock ‘Undervalued’?

In our view, an undervalued lithium stock typically shows some or all of the following:

• A price-to-earnings (P/E) ratio significantly below industry averages
• Proven or probable reserves not fully priced in
• Expansion potential or recent acquisitions overlooked by the market
• Strong operating margins despite weak spot prices
• Analysts’ targets significantly above the current share price

Let’s explore six such lithium stocks that, in our opinion, deserve closer scrutiny.

 

Allkem Limited (ASX: AKE)

Investment Thesis:

Allkem is a vertically integrated lithium producer formed through the merger of Orocobre and Galaxy Resources. Its operations span Argentina (Salar de Olaroz and Sal de Vida), Australia (Mt Cattlin), and Japan (Naraha lithium hydroxide plant). Despite its global footprint and project flow, the stock remains under pressure, largely due to lithium price weakness and broader macro sentiment.

From a valuation perspective, we believe the market is not fully recognising the cost synergies, geographic diversification, and downstream integration that Allkem offers. Its FY2023 results revealed solid EBITDA margins, and with further production capacity expected to come online, earnings could re-accelerate even in a subdued price environment.

Outlook:

The proposed merger with Livent Corporation to form Arcadium Lithium is the next step in scaling Allkem’s global operations. This merger would create a diversified lithium powerhouse with vertically integrated assets and enhanced access to North American and European markets. We believe this transaction de-risks future cash flows and improves strategic optionality, making the current valuation a potential entry point for long-term investors.

 

Liontown Resources (ASX: LTR)

Investment Thesis:

Liontown’s Kathleen Valley project is one of the most advanced hard-rock lithium projects in Australia, with a projected mine life of over 20 years. The company holds long-term offtake agreements with Tesla, Ford, and LG Energy Solution—blue-chip counterparties that highlight the strategic importance of its asset.

Despite securing funding and advancing project construction, the stock sold off significantly after Albemarle withdrew its $6.6 billion takeover bid. In our view, this price decline reflects market overreaction rather than deteriorating fundamentals. The capital structure remains sound, and Kathleen Valley’s scale makes Liontown a likely consolidation target in future M&A cycles.

Outlook:

With first production expected in mid-2024, Liontown is on track to become a key spodumene supplier to global battery manufacturers. The company is also evaluating downstream integration opportunities, which could enhance margins and reduce pricing risk. As construction milestones are achieved, we believe the stock will be progressively re-rated.

 

Core Lithium (ASX: CXO)

Investment Thesis:

Core Lithium is already producing from its Finniss project near Darwin, making it one of the few ASX juniors to transition from explorer to producer. However, its market cap has come under pressure due to a slower-than-expected ramp-up and soft lithium prices.

What’s being overlooked, in our view, is the company’s low capex profile, access to infrastructure, and strong offtake agreements with major names like Tesla and Ganfeng Lithium. Finniss holds significant exploration upside, and further resource upgrades could materially extend mine life and scale.

Outlook:

We believe Core Lithium is entering a critical turning point. Operational issues are being addressed, and once steady-state production is achieved, the stock could re-rate meaningfully. Long-term value will be driven by increased throughput, additional project development (e.g., BP33), and price stability across the lithium carbonate market.

 

Pilbara Minerals (ASX: PLS)

Investment Thesis:

Pilbara Minerals is a cornerstone asset in Australia’s lithium sector. Its flagship Pilgangoora operation is one of the largest independent hard-rock lithium mines globally. Pilbara’s balance sheet strength, operational excellence, and marketing sophistication (via the BMX platform) differentiate it from peers.

Recent share price weakness reflects broader sector sentiment rather than any company-specific deterioration. Pilbara remains profitable at current prices and has generated substantial free cash flow over the last two years. Its downstream strategy, highlighted by the Mid-Stream Project, adds another layer of optionality for investors.

Outlook:

Pilbara is well-positioned to benefit from any price rebound in lithium concentrate. The company’s unique auction model for spot cargoes provides pricing transparency and revenue optimisation. With ongoing expansions and potential vertical integration, we consider Pilbara a defensive lithium holding with medium-term upside.

 

Sayona Mining (ASX: SYA)

Investment Thesis:

Sayona Mining, through its 75% stake in North American Lithium (NAL), is one of the few ASX companies with exposure to lithium production in Quebec. The asset, formerly owned by Chinese groups, has been successfully restarted and is shipping lithium concentrate to off-take partner Piedmont Lithium.

While the market continues to discount Sayona as a speculative play, we see the current valuation as a disconnect from its growing production footprint and future scalability. Exploration success at nearby Authier and Moblan projects adds upside.

Outlook:

With commercial production initiated and exports underway, Sayona’s strategic value in the North American supply chain cannot be ignored. The company’s integration with Piedmont offers downstream opportunities, and its position aligns well with US policy incentives for domestic battery metals. We believe Sayona is underappreciated relative to its near-term growth profile.

 

Ioneer Ltd (ASX: INR)

Investment Thesis:

Ioneer’s Rhyolite Ridge project in Nevada is uniquely positioned with both lithium and boron resources—a key advantage for reducing operating costs and increasing product diversity. Regulatory delays have clouded the investment narrative, but the project remains technically and economically robust.

The US Department of Energy’s conditional loan commitment of US$700 million underscores the strategic importance of Rhyolite Ridge to the US supply chain. With a binding offtake agreement from Ford Motor Company and EcoPro Innovation, demand visibility is strong.

Outlook:

Rhyolite Ridge could begin construction in 2025, pending final approvals. Once operational, it is expected to produce 22,000 tonnes of lithium carbonate equivalent (LCE) annually. Ioneer’s US listing aspirations and its ability to access Inflation Reduction Act benefits could unlock further value. We view the current valuation as misaligned with long-term fundamentals.

 

What Should Investors Keep in Mind?

While lithium has structural tailwinds, it remains a cyclical commodity. Investing in lithium stocks requires a high tolerance for volatility and a long-term view. We believe investors should look beyond the headlines and focus on:

• Project economics: Cash costs, internal rates of return (IRRs), and payback periods
• Funding sources: Are projects financed or still seeking capital?
• ESG credentials: Lithium extraction has environmental concerns—does the company address them?
• Offtake partners: Who’s buying the lithium?

We also recommend monitoring geopolitical developments, particularly in South America and China, as they can impact supply chains.

 

Final Thoughts

The lithium story is far from over. While short-term sentiment has cooled, the structural demand from EVs, grid storage, and clean tech remains intact. In our view, the current correction is creating a rare opportunity to pick up quality lithium stocks at discounted prices.

Each of the companies we’ve covered today represents a unique part of the lithium supply chain. Whether you favour near-term producers like Pilbara and Core or strategic North American exposure through Ioneer and Sayona, there’s something here for every risk appetite.

Just remember, undervalued doesn’t mean risk-free. Do your due diligence, stay updated with company announcements, and consider your investment horizon carefully.

 

What are the Best ASX Stocks to invest in right now?

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Frequently Asked Questions

• What is the long-term outlook for lithium?

  The long-term outlook is strong. According to BloombergNEF, lithium demand could grow fivefold by 2030, driven by EVs and renewable energy storage. Supply bottlenecks may persist, supporting prices over the medium to long term.

• Are lithium stocks suitable for long-term investment?

  Yes, if selected carefully. Companies with strong projects, secured funding, and strategic offtake agreements tend to perform better over time. Volatility is common, but long-term fundamentals remain intact.

• Why have lithium prices dropped recently?

  Prices fell due to oversupply concerns, slowing EV sales in China, and higher inventories. However, many analysts see this as a short-term correction rather than a trend reversal.

• How can I assess if a lithium stock is undervalued?

  Look at valuation metrics like P/E ratios, price-to-NAV, and compare them with peers. Consider project stage, financing, and market sentiment. Analyst price targets and insider buying can also offer clues.

• Is it better to invest in lithium miners or battery manufacturers?

  That depends on your strategy. Miners offer direct exposure to lithium prices, while battery manufacturers provide downstream exposure. Some investors combine both for a balanced approach.