Why Analysts Call Lithium Americas' DOE Partnership A 'Game Changer

Shares of Lithium Americas Corp (NYSE:LAC) soared in early trading on Wednesday after the company announced an agreement with the U.S. Department of Energy, in conjunction with General Motors Co (NYSE:GM).

Here are some key analyst takeaways:

• Wedbush analyst Daniel Ives maintained a Neutral rating, while raising the price target from $5 to $8.
• JPMorgan analyst Bill Peterson does not have a rating on the stock.

Check out other analyst stock ratings.

Wedbush: Lithium Americas has reached a non-binding agreement with the U.S. Department of Energy to advance the first draw of around $435 million of its previously announced DOE loan of $2.26 billion, Ives said in a note. In exchange, the DOE has agreed to defer $182 million of debt service over the first five years of the loan and could receive a 5% equity stake in the company as well as a 5% economic stake in the joint venture with General Motors, he added.

The Trump administration sees this as a "massive opportunity" for the U.S. to "reduce reliance on China and other foreign adversaries for lithium, which remains a critical element in the U.S. supply chain across various key verticals including defense, autos, energy, and electronics," the analyst wrote. This is a "game changer deal" for Lithium Americas and represents "an incremental positive" for the company, he further stated.

JPMorgan: The deal gives the federal government a 5% stake in Lithium Americas and another 5% stake in the company's Thacker Pass project, Peterson said. The government intends to eventually exit the investment, he added.

"Under the terms of the updated agreement, the loan principal remains unchanged at $1.97B, with capitalized interest expected to fall due to lower projected interest rates," the analyst wrote. Other companies that have received landmark government stakes, such as MP Materials Corp (NYSE:MP) and Intel Corp (NASDAQ:INTC), have significantly outperformed the market, he further stated.

LAC Price Action: Lithium Americas shares were up 24.43% at $7.10 at the time of publication on Wednesday. The stock is approaching its 52-week high of $7.53, according to Benzinga Pro data.

Read More:

• Lithium Regains Buzz Despite Lukewarm Short-Term Prospects

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