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Why Standard Lithium Shares Popped 28.8% on Wednesday

By Travis Hoium – Aug 18, 2021 at 4:17PM

Key Points

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Yesterday's losses have seen reverses, and then some.

What happened 

Shares of lithium mining stock Standard Lithium (SLI -6.75%) jumped as much as 28.8% on Wednesday, recovering from a big decline yesterday. At 3:20 p.m. EDT shares were still up 18.5% for the day, but are down slightly over the past week. And given everything going on in the lithium market the confusion about the lithium market's future may last for months. 

So what

Yesterday's drop was driven by Bank of America predicting that lithium is likely to suffer from weaker demand as fewer people buy laptops to work from home and the supply of lithium goes up from new mines being built. As supply and demand goes, that would likely lead to lower prices for lithium and weak profitability for miners. 

Pop-up mining equipment in front of a digitally rendered mine.

Image source: Getty Images.

On the flip side, one of the biggest deposits of lithium sits in Afghanistan, which recently fell into Taliban control. That may mean that a potentially large supply of lithium will sit untapped, possibly helping the oversupply problem, especially as the U.S. tries to wean itself off of the Chinese supply of lithium.

Is this week's news bullish or bearish? The market can't seem to decide and that's why Standard Lithium's stock has had such big moves. 

Now what

This week's big moves are really par for the course with lithium miners. Sentiment can change quickly and so can the direction of these stocks. Whether you're bullish or bearish on the industry, I don't see a reason to change your investment thesis based on this week's news, but rather look for longer-term earnings and lithium price trends to show where the industry is headed.  

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Standard Lithium Ltd. Stock Quote
Standard Lithium Ltd.
$3.87 (-6.75%) $0.28
Bank of America Stock Quote
Bank of America
$34.47 (-4.46%) $-1.61

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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