A funny thing happened to lithium mining start-up Lithium Americas (LAC) stock on Tuesday -- funny, that is to say, unless you own it. In a note covered on TheFly.com this morning, analysts at Deutsche Bank raised their price target on Lithium Americas stock by 18%, to $40 per share.
And then Lithium Americas stock crashed, closing down 10.7% for the day.
Now obviously, that's not how stock upgrades usually work. Usually, when an analyst says something nice about a company, that company's stock goes up. And what Deutsche Bank had to say was pretty nice:
Lithium Americas stock is well positioned heading into Q2, predicted the analyst, as prices for lithium supply are improving. And it doesn't hurt that last week the Biden Administration announced it will invoke the Defense Production Act of 1950 "to encourage domestic production of critical minerals for electric-vehicle and other types of batteries," essentially promising to subsidize the operations of companies like Lithium Americas.
And yet, that may be the problem. Thanks to the administration's promise to support lithium companies in general (and Lithium Americas in particular, whose Thacker Pass project is the lithium mining project closest to completion here in the U.S.), Lithium Americas stock went on a terrific run last week, gaining more than 18%.
By close of trading Monday, that meant that Lithium Americas stock was already trading within just 3% of Deutsche Bank's new and improved price target. Once investors realized that this morning -- that there might not really be that much more upside left in the stock -- I suspect that this is what caused them to decide to cash out some profits and sell Lithium Americas stock today.