Lithium Argentina Has Growth Potential, But Analyst Cautions About Valuation Concerns

BMO Capital Markets analyst Joel Jackson resumed coverage on Lithium Americas (Argentina) Corp. LAAC with a Market Perform rating and a $7.50 price target.

LAAC, renamed Lithium Argentina, is an Argentine lithium brine pure-play with its flagship ramping Cauchari-Olaroz JV carbonate/LCE asset.

LAAC maintains ~45% interest in Cauchari-Olaroz, ramping to ~40kt carbonate capacity in 2024 (near-zero Q4/23 sales). 

Jackson models a 20kt stage 2 expansion by 2028 for ~$600 million capex (LAAC: ~$300 million), and additional value may come from the 100%-owned, early-stage Pastos Grandes and Sal de la Puna assets.

There's a tangible upside to the stock, the analyst notes, but there are risks (operational, GM lockup, lithium macro, etc.), and LAAC seems relatively expensive versus peers even if contracting lithium prices and stock multiples recover. 

The analyst's $7.50 target is based on ~5.5x 2025E EV/EBITDA, marking a premium compared to peers. The valuation also attempts to incorporate some value for stage 2 of the project.

LAAC is expected to generate around $250 million EBITDA post the Cauchari-Olaroz stage 1 ramp, increasing to approximately $425 million post stage 2, supported by robust sales and efficient cost structures.

Contracting lithium prices and multiples may recover, but LAAC appears relatively expensive, the analyst adds.

The analyst notes that General Motors Company GM owns about 15 million shares (approximately 9% of the company); however, there is a possibility of divestment post the lockup period.

Price Action: LAAC shares closed at $6.01 on Wednesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.