Why Sigma Lithium Stock Soared Today

Sigma Lithium (NASDAQ: SGML) stock, a small producer of lithium based in Sao Paulo, Brazil, soared in afternoon trading on the Nasdaq Monday -- and it's not hard to guess why.

This morning, a series of three separate investment banks all raised price targets on Sigma Lithium's much larger rival Albemarle (NYSE: ALB), predicting gains of as much as 24% this year. No surprise then that Sigma Lithium stock is up 17% through 2:10 p.m. ET today.

Especially not after you hear what a fourth analyst has to say about the market for lithium for electric car batteries.

Image source: Getty Images.

Scotiabank loves lithium

UBS, Mizuho, and Jefferies all raised price targets on Albemarle stock today, but Scotiabank was the one that gave the most detail on why Albemarle -- and other lithium stocks -- are worth buying.

Lithium prices have more than doubled over the last three months. "If you've missed the lithium rally," though, "don't worry too much," says Scotiabank analyst Ben Isaacson. "We think it's only the first leg, in what should be a multi-year tightening cycle."

Isaacson cites supply constraints as driving "a market inflection" that could push lithium carbonate equivalent prices to $20,000 per metric ton by 2028, and price spodumene concentrate at $2,150 per metric ton. What's more, the analyst says he's being conservative, and actual prices could shoot even higher.

Is Sigma Lithium stock a buy?

Isaacson argues supplies are tight enough already that it doesn't matter much whether electric car sales "slightly miss[] expectations," nor even if the utility-scale battery storage market doesn't take off as expected. No matter what, prices are going higher -- perhaps much higher.

Sigma Lithium investors had better hope he's right. Unlike Albemarle, Sigma Lithium has never earned a profit. Maybe higher lithium prices can help with that.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group. The Motley Fool has a disclosure policy.