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TheStreet Open House

Lithium Battery Stocks: Which Are You Most Bullish On?

Stocks in this article: GM GE PPO VLNC SQM JCI

Lew said he'll become increasingly optimistic about Valence stock once it resolves its intellectual property dispute with the University of Texas. At the same time, Wm Smith analyst Rob Young expects the company's overall intellectual property disputes to find a resolution, as they have done in the past.





According to Morningstar, industrial chemicals, fertilizers, iodine and lithium producer Sociedad Quimica Y Minera De Chile (SQM - Get Report) bears believe the company faces possible oncoming pricing pressures in its lithium segment, owing to the possibility that Australian miner Orocobre could add as much as 40,000 metric tons of lithium production over the next several years.

Morningstar also notes that SQM has in the past resorted to more expensive energy sources during natural gas shortages in Chiles. "This situation is expected to continue, eating away at the company's profits."

Potential SQM bull scenarios highlighted by Morningstar include a surge in lithium prices owing to strong demand for lithium batteries in the electric vehicle space, and the usage of lithium-aluminum alloy in next-generation airplane models.

"We predict SQM will maintain its market share leads," Morningstar analyst Jeffrey Stafford says in note. "However, this is not a foregone conclusion, given that the company will always be susceptible to irrational pricing in all of its markets."

S&P analyst Efraim Levy estimates that Johnson Controls (JCI - Get Report), which specializes in auto interiors, building efficiencies and vehicle batteries -- especially lead acid batteries, but also increasingly lithium batteries -- will see revenue rise by 10% in fiscal 2011, owing to an increase in vehicle sales and production in the U.S. and most other regions.

However an increase in raw material costs and pricing pressures from customers could offset these positive trends, he said.

In a note, Morningstar analyst David Whiston said Johnson Control's heavy investment in lithium ion batteries and its purchase of the battery business of auto parts supplier Delphi -- the same one that helped Delphi build a presence in China -- will contribute to growth over the years. However, it's still unclear whether Johnson Controls will ever become a leader in the emerging lithium battery market, Whiston says.

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