Why standard lithium stock is still rising

Actions of Standard lithium (SLI 9.95%) rose as much as 18% in early trading on Thursday before turning around and giving back much of their gains. Despite the reversal, as of 2:22 PM ET, the stock remains up 7.8% — and it’s no mystery why.

Inspired by the news about Rio Tinto Groupits $6.7 billion takeover bid Arcadiu Litiu (ALT -0.36%) yesterday, investors are thinking of Standard Lithium — a $2 lithium stock with no profits or even revenue — as a “cheap” way to bet that lithium prices are about to rise.

Is it time to buy lithium stocks?

It’s not a completely logical idea. After all, Rio Tinto said yesterday that it was buying Arcadium Lithium as a “countercyclical expansion into a high-growth market” — suggesting that it believes the cyclical lithium mining sector is near bottom and that both demand and prices for lithium are ready to grow again.

Buying knocked-down lithium stocks just before a rally in lithium prices makes some sense (assuming Rio is right). That said, investors in this sector need to be picky about the lithium stocks they choose to invest in. And there’s a big difference between buying a lithium stock like Arcadium and buying one like Standard Lithium.

Why Standard Lithium Stock Is Still a Sell

At $2 a share, Standard Lithium looks cheaper than Arcadium, which costs closer to $6 a share. However, there is a reason (several of them actually) why Standard Lithium stock is so cheap.

First, Arcadium Lithium is an actual lithium producer, while Standard Lithium is more of a wanna-be lithium producer, with no reported revenue in the last 10 years. In fact, according to analysts, Standard Lithium is not expected to generate revenue until 2028 at the earliest. Profits it will take even longer to emerge for Standard Lithium, while Arcadium Lithium reported earnings of $226 million last year and could double that by 2027.

Simply put: Arcadium Lithium stock is a buy — and Standard Lithium is not.