Why Lithium Americas Stock Popped 10% Tuesday

What happened

Stock markets staged a broad rebound on Tuesday on hopeful news out of Eastern Europe, where Russian troops appeared to be pulling back from a feared invasion of Ukraine. By close of trading today, the S&P 500 had gained 1.6% and the Nasdaq was up 2.5%.

Few stocks enjoyed gains quite as big as what investors in lithium mining company Lithium Americas (NYSE:LAC) just received, however. Helped by a positive note from investment bank J.P. Morgan, the stock closed the day up 10.1%.

Image source: Getty Images.

So what

As TheFly.com reports, J.P. Morgan stepped up to defend Lithium Americas stock today after the shares had dropped 33% from their high hit in late November.

Lithium Americas, said the banker, can look forward to “numerous catalysts ahead of it that should be positives for its stock, the most immediate of which should be the resolution of litigation, and the subsequent issuance of final permits to begin production of lithium at the company’s mine in Thacker Pass in Nevada.

Later, J.P. Morgan says investors can look forward to the beginning of lithium production at the company’s Cauchari-Olaroz mine in Argentina midyear, followed by progress toward production at the Pastos Grandes lithium project, also in Argentina (although that one won’t begin production before 2024).

Now what

For the time being, Lithium Americas remains a pre-revenue company. If all goes as planned, however, analysts polled by S&P Global Market Intelligence believe that this will be the year Lithium Americas finally begins generating revenue — perhaps as much as $106 million, with revenue growing larger from there.

Analysts expect Lithium Americas to become almost immediately profitable in 2022, at least from a pro forma perspective. Actual profits under generally accepted accounting principles (GAAP) won’t arrive until 2023, but could rise swiftly from there, potentially reaching as much as $1.70 per share by 2025.

At today’s prices, Lithium Americas stock therefore trades for about 18 times 2025 projected profits, which sounds like a fair price — but first things first. Let’s see the revenue start flowing before we start counting any profits.