Shares of lithium mining company Lithium Americas (LAC -3.99%) crashed in Tuesday trading and are down 11.5% as of 1:20 p.m. EDT. This was the stock's third straight "down" day since reaching a recent high above $19 late last week.
Who's to blame for Lithium Americas investors' recent run of bad luck, though? You may be surprised to learn that it's actually larger lithium miners Albemarle (ALB -2.46%) and Livent Corporation (LTHM -2.08%) -- and the bank that warned against buying them yesterday.
On Monday, Bank of America reiterated underperform (i.e., sell) ratings on both Albemarle and Livent Corporation, warning that these two -- and perhaps other -- lithium stocks have been the subject of "significant hype" over the potential for prices of lithium metal rising.
BofA doesn't deny that growing demand for electric cars is driving lithium prices higher. However, it does warn that there's a counter-trend at work, as economies open up and people spend less time quarantined at home typing on lithium-powered laptops or doing home improvements with lithium-charged cordless power tools.
This counter-trend has the potential to dampen demand for lithium. And at the same time, says BofA, lithium producers such as Albemarle and Livent -- and eventually, Lithium Americas, too -- are ramping production of the metal.
In 2022, the bank predicts that lithium production volume will be double what's produced in 2021 -- and as Economics 101 teaches us, rising supply has the potential to limit price rises, even if absolute lithium demand from electric-car manufacturers does increase. If this proves to be the case in the lithium market, then lithium stocks could well be overpriced already, warns Bank of America.
Today, Lithium Americas investors are heeding that warning.