Are we there yet?

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Are we there yet?

In this episode, we will cover:

• Promising prospects of lithium stocks and the forecast for their appreciation 
• Importance of doing your own due diligence before investing
• Sharing positive feedback from PIF members and discussing Piedmont Lithium (PLL) 
• Overview of lithium prices and their impact on stocks 
• Discussion on short selling and its effects on stock prices 
• Future demand for lithium and the growth of battery projects 
• Predictions on the recovery of lithium prices and investment opportunities 
• Emphasis on the healthy financials and management of Piedmont Lithium
• Final thoughts on the potential for significant appreciation in lithium stocks 

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salam@practicalislamicfinance.com

ABOUT OUR PODCAST

Our podcast is about helping people ethically build wealth. We cover a broad range of topics including stock and crypto investing, product reviews, and general financial well-being.

DISCLAIMER

Anything you hear in this video is an opinion. It is not personalized financial advice. Make sure you do your due diligence before making any investment decisions.

Transcript

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Asalaamu alaikum everyone, I'm Gomaa Mubarak. Today is June 14th. I hope you are doing well. Today, we're going to talk about a topic that I've addressed on this channel before, which is the promising prospects of lithium stocks. And try and answer the question, when will lithium stocks begin their appreciation? As I am forecasting, so without further ado, let's get started. As always, this is not financial advice, so be sure to do your own due diligence before making any investing decisions. And please leave a like if you enjoy these lives that I'm doing. My goal for this video is to get 100 likes. Let's keep it very humble and easy to achieve. So 100 likes, that would be really appreciated guys. Oh, and use code 24, you have until Sunday at midnight to do this. You get 35% off of PIF memberships if you're not already a PIF member. So this is a great deal. And in fact, today, we sent out a survey to our PIF members asking them how their experience with the service has been. And I've chosen some of the my favorite comments. So this is from one PIF member, he says, I've been a member more than two years, but I didn't invest until this March. From March to now, my portfolio is up 36% waiting for PLL Tesla to add to these gains. Thanks for can and team. And we'll talk about PLL in this life. So do join us if you aren't already a member link and everything else is in the description. So let's talk about lithium prices. So lithium prices have been basically near the lows, the five year lows. And this obviously has reflected itself in excitement or lack thereof surrounding lithium stocks. Now, PLL, which is a stock that we'll talk about in this live, PLL only four years ago was valued at a billion dollars. And now when the mind you win the price of lithium was not all different from where it is right now. In fact, it was lower than where it is right now. It was valued at $1 billion since then they've expanded into many other projects. And yet their market cap is only slightly north of 200 million. So I think there's a four or five X here in Piedmont lithium over a sufficient time horizon. And we'll talk about that in a second. Now, the shorts have been piling into lithium stocks. So you can see the percentage of shares that are short for PLL, for example, how they've been going up over time. And in fact, right now PLL is at a percentage of shares that are short of float close to 20%. And same deal with LAC, same deal with LB. The short percentage is between 15 and 20% of overall float. So these are people betting against the price of these stocks. They're borrowing the stocks and selling them on the open market, hoping that they can buy the stock back for less than what they sold it for. So this is creating artificial supply for these stocks, which is lowering their price further. Now, this is a double edged sword. So for holders of the stock, they're unhappy because the price of their investments is going down. But for people who are buying the stock, this is actually an opportunity because the prices of these stocks is being artificially depressed by artificial supply. Because remember, with shorts, it's not the owners that are selling. It's borrowers of these stocks that are selling. So this is artificial supply that is making the price of these stocks artificially low. And there is reason to think, to assess as I do, that the prices of that lithium and renewable energy sources in general will recover in a big way. So for example, in 2023, the combined investment in renewable power and grids overtook the amount spent on fossil fuels for the first time ever. So there's a very strong secular trend here towards renewables. And what do you need with regards to renewable energy? Well, you need, obviously, to move that energy through space using the grid. So you need investments in the grid and transmission lines. But you also need to move that energy through time, and in order to do that, you need batteries. And the most common technology for batteries and energy storage is our lithium ion batteries. Now, there are a lot of different types of lithium ion batteries, but they're all lithium ion. So lithium is a main component in these batteries. So it's, I think, logical to suspect that the demand for lithium is going to be higher with time. And when you look at the size of the average battery project, it has grown massively in just the last few years. So battery projects are now 15 times bigger than they were five years ago. The average capacity measured in megawatts of a battery storage project built into the U.S. has grown from four megawatts in 2019 to 61 megawatts in 2024 and expected to reach 89 megawatts in 2026. So you can see on a percentage basis how massive this growth is, and it will correspond with increase in demand for the materials necessary for these battery projects. And perhaps the only graph that you need to see in this regard to visualize supply and demand and the relationship between them is the following. So you can see in 2022 and that's in the light blue supply for lithium at 750 demand at 720. But in 2030. So right now or the supply and demand picture is relatively balanced. In 2030, there's going to be a huge imbalance here with supply at 1.6 and demand at three. So almost twice. And the issue with lithium and lithium mining is that projects require years to actually get the permissions required and ramp up and reach production stage. And so it's not like you can in a short period of time spin up a bunch of lithium mining operations. I don't think there's any shortage of actual lithium in the world to support this. There's an abundance of lithium. However, the projects are relatively scarce with regards to the demand that is forecasted and in here lies the opportunity. We are seeing in the near term talking, you know, five years. Okay, or again, how long am I going to hold this investment? Do I have to hold it five years? No, I don't think so. Now we are seeing signs of recovery for some of the main drivers for lithium demand. So, for example, EV sales were rather encouraging. So global EV sales jumped 18% in Q1 of 2024 in China led the way with 28% year over year growth. And I think that we've probably reached the trough in terms of the deceleration in growth of EV demand. By the way, don't mix the two. When you hear headlines about deceleration in growth, that doesn't mean there's deceleration in demand. It means growth is still positive in the in demand for EVs. It's just not growing as fast as it was in previous years. So it's still growing, but just not as fast, which typically happens when you have a larger and larger base over time. And as I mentioned, in addition to electric vehicles, you have the battery projects that are increasing in size all the time. So, and these are these are now, right, we're talking 2024. And so I think that there's a confluence of signs pointing to the fact that we're probably near dawn here with regards to lithium prices. I don't think that they're going to go lower substantially, however, in the near term. However, if we were to adopt a longer term view and said, okay, we have an investment horizon of 12 to 24 months. If it takes 36 months, that's fine. I think then the supply demand imbalance becomes much more clear. Now, if we want to talk about Piedmont Lithium specifically, you can see basically in the forecast of other analysts so that I'm not guilty of being biased. So if you look at the five or six analysts on the street that are forecasting its revenue and earnings and the cash from operations, we can see that in 2024. There was a dip to start the year, but we can see that towards the end of 2024, especially revenue is arcing upwards. The yellow line, that's the cash from operations, that starts to pick up as well. So, you're going to have increased revenue, increased earnings in Shala. And also the CAPX is going to for H2, second half of 2024 is going to be projected to be half as much as it was in H1. So you're going to have more revenue and less capital expenditures and H2 of 2024. And that's why I think that we may be close to an inflection point with this stock, which has performed, as you can see on the right here, those red numbers performed rather terribly in the last pick your time horizon. However, this has been, I think, a great opportunity to accumulate. So whether it's week, month, quarter, half year, year, year to date, it's performed not good, but the fundamentals of the business have been improving. The projects of the business have been expanding. And actually recently, April 14, they received permission for their basically flagship project in North Carolina. They're, they're basically most important project. They finally got approval for that. And that takes years. And on that day, and this just tells you how not in favor, these stocks are on that same day. But by the end of the week, it was down 8%, because the market had basically forgotten about the permitting that Piedmont had acquired, which was a really big deal. And went on to think about other headlines during that week, one of which was Tesla was laying off employees. Another one was Piedmont, not Piedmont, lithium, but another lithium company was diluting shareholders and raising more money. And so that permitting event was completely lost on the market. And it ended that week actually down after, you know, spiking on the news. So this, I think is, you know, when you want to buy, when things are, when the market is that pessimistic about a company or an industry and is ignoring the fundamental changes that and progress that each company is making in that industry, that's a golden opportunity, I think. Now, when the turnaround happens, you can't really time that precisely, but there are signs that I think are encouraging. Like I said, for Piedmont in specifically, if you go back, you know, a few years, this company had a market cap north of$1 billion. And it had a way longer runway until it reached profitability, had fewer project and didn't have permitted permitting on its most important project. So the fundamentals have improved, but the company has fallen to a fifth of what its value was a few years ago. So I do think that there's an opportunity here, if you can stomach the volatile, they stomach the red numbers that you can see here. If you can stomach some of that and you have the patience, then I think it will pay off. Now, again, this is what I do. I can only tell you what I'm doing with my own money and with PIA portfolios, do your own due diligence. And then also, I think an important thing to consider is the amount of debt that a company has, because, yeah, okay, since we can't pinpoint exactly when lithium prices are going to turn around, we need to make sure that the company has the sufficient runway to reach that point when it does turn around when prices do turn around. And when you look at Piedmont, they basically have no debt at all. So then they have a healthy cash balance, so they should be able to get there. One of the things that I really like about this company, their CEO Keith Phillips has been in the industry for years. And he's very familiar with lithium mining and very importantly, the most important position, his personal portfolio is Piedmont Lithium Stock. And so he's been very good at diluting shareholders because he has skin in the game. So that's always something that you want to look at when you're analyzing any company. So let's conclude our thoughts here. The International Agency estimates that global lithium demand could increase by 40 times by 2040. Now, timing the lithium recovery is impossible. But companies that make it to recovery, considering how bearish the market is on lithium stocks right now, they stand to appreciate markedly compared to current prices. And the appreciation will likely be very quick unless the short ratio, unless the shorts cover themselves very quickly, because we could get a short squeeze here in a lot of these lithium stocks, because as the prices go up, the shorts are going to end their losses mount. They will get margin called and they can either add more capital or they can close out their position. And so that's when you have a short squeeze. And because when they close out their position, they have to buy the stock. So that creates artificial demand for the stock. So shorts really create artificial supply on the way down, artificial demand on the way up. So they cause overshooting on the way down and on the way up. And when you see that overshooting from shorts to take advantage of that, you want to be a buyer when it overshoots on the downside and you want to be a seller when it's overshooting on the upside. So it's very important to have your prices in mind. So this is the price I'm going to buy below. This is the price I'm going to sell above so that you can take advantage of that. So at the end, I would like to remind you all that we have a 35% off using code APHA. The details are in the description and I want to leave you with this comment from one of our PIF members. I had no background in investing or financial education. I've made 200k and last one year with PIF. And then my dream come true and taught me to be patient with good investments, really grateful for PIF. God bless the team and again, well, thank you so much. I really appreciate that. I've honestly these types of comments make my day, week, month, year. I love hearing them. So thank you for those who leave these comments. And yeah, become a PIF member. We'd love to have you. If you're not a subscriber, subscribe, that's free. And leave a like, like I said, let's try and get this to 100 likes. So let's go to questions very quickly. I think I did explain the idea of shorts. What software do you use for streaming? Shift between camera presentation planning to create some educational videos and I really like your way of presentation. I actually use StreamYard, so StreamYard.com. Use that. It's pretty good. YPLO specifically, there's, I mean, I think you're a member. I just go to our deep dive on PLL. You should see it in our messages. This is a bigger topic for me to cover in the question and answer session. But I did cover some reasons in this slide. So hopefully that helps. Thank you all once again. Gomaa Mubarak, enjoy your weekend. And until next time, take care of yourself.