TD Cowen Downgrades Lithium Americas After 96% Stock Surge

Lithium Americas (LAC) experienced a remarkable surge in its stock price, rallying nearly 96% on March 15, 2024, during a trading session that saw a record 289 million shares exchanged. This dramatic increase marked the company’s best trading day to date, significantly surpassing its 200-day average trading volume of just over 7 million shares, as reported by Koyfin.

The stock’s rise was sparked by news that Lithium Americas was in negotiations with both the U.S. government and General Motors to potentially renegotiate the terms of a $2.26 billion loan from the Department of Energy for the Thacker Pass project. These discussions could result in the U.S. government obtaining a 10% stake in the company, igniting investor interest and enthusiasm.

Despite the positive momentum, TD Cowen analysts downgraded Lithium Americas to a rating of ‘Hold’ from ‘Buy’ shortly after the stock’s peak. They maintained a price target of $5, indicating a potential 16.8% downside from the stock’s closing price on the previous day. Analysts expressed skepticism regarding the sustainable economic model of the company, particularly with General Motors as its current anchor tenant, emphasizing that the existing valuation of Lithium Americas may be inflated.

Investors on social media platform Stocktwits remained overwhelmingly bullish about Lithium Americas, with many expressing confidence in future price movements. One user noted, “I would be very uncomfortable holding a short position on this, the way it held up after the news. I would bet on another pump tomorrow.” This sentiment reflects the speculative nature of the stock’s recent performance.

The Thacker Pass project, which is anticipated to be the largest source of lithium in the Western Hemisphere upon its expected commencement in 2028, has seen significant developments over the years. The project received approval during Donald Trump‘s administration and secured federal funding during Joe Biden‘s presidency.

With the gains observed on March 15, U.S.-listed shares of Lithium Americas have effectively doubled in value throughout the year, showcasing the volatile nature of the stock amid evolving market dynamics and investor sentiment. As discussions continue regarding the potential U.S. government stake, market observers will be closely monitoring the company’s strategic decisions and their implications for future growth.