We recently published a list of the 11 Most Promising EV Battery Stocks According to Analysts. In this article, we are going to take a look at where Sigma Lithium Corporation (NASDAQ:SGML) stands against the other promising EV battery stocks.

Despite the electric vehicle industry growing at a fast pace, some challenges remain. The major ones are range anxiety among consumers, slow battery charging time, and the availability of charging infrastructure. However, even with these challenges, the industry remains healthy and a lot of energy and resources are being contributed toward it.

The infrastructure market is expected to grow at a phenomenal pace as PwC expects the EV supply equipment (EVSE) market to grow from $7 billion to $100 billion by 2040, at a 15% compound annual growth rate.

For electric vehicle components, governments around the world are incentivizing EV production. For example, the U.S. Department of Energy (DOE) recently announced $1.7 billion in funding to transition 11 vulnerable auto manufacturing plants across eight states to EV production and related components. For more details, you can read 8 Best EV Stocks to Buy According to Short Sellers.

Advancements in EV Battery Technology

Due to the environmental impacts of internal combustion engines, scientists have also been working tirelessly to solve the current problems faced by EV batteries. Researchers, led by the University of Colorado Boulder, have uncovered the cause of battery degradation, a common issue that leads to reduced capacity over time. Their study, published in Science.org, may pave the way for improved lithium-ion batteries, which are crucial for EVs and energy storage.

Using advanced X-ray technology, they discovered that hydrogen molecules from the battery’s electrolyte bind to the cathode, taking spots meant for lithium ions, which weaken the battery’s performance. This new understanding could help engineers develop longer-lasting, cobalt-free batteries for EVs, which would increase driving range, reduce costs, and address environmental and ethical concerns related to cobalt mining.

Additionally, according to a research report published in Frontiers in Quantum Science and Technology, Yuji Hatano and his team explored the impact of transverse magnetic fields on diamond quantum sensors for EV battery monitoring. Their research aimed to improve measurement accuracy for temperature and magnetic fields, which are crucial for determining the state of charge (SOC).

The study showed that diamond sensors enhance SOC estimation, which could potentially increase the EV cruising range by 10%. A prototype demonstrated high precision with currents up to 1,000 amperes, and misalignment detection was highly accurate. The findings suggest diamond quantum sensors could significantly improve battery monitoring in EVs and other industries.

Moreover, solid-state batteries could also reduce the charging time in batteries which could drastically improve the consumer sentiment and increase the demand for EVs. It was suggested by Mark Fields, former Ford CEO and President on CNBC’s ‘Squawk Box’ and we discussed it in our article on the best EV stocks for the long term. Here is an excerpt from the article:

“Fields suggested that automakers need to offer more affordable EVs and expand hybrid offerings while working towards breakthroughs in battery technology, especially solid-state batteries. These batteries could eventually reduce charging times to match the convenience of filling up at a gas station…

…He emphasized that while automakers are working on delivering low-cost EVs, the real game-changer will be the development of solid-state batteries, which could significantly improve charging times and consumer convenience.”

Our Methodology

For this article, we identified over 20 EV battery stocks through screeners and ETFs. We narrowed our list to 11 stocks with the highest average analyst price target upside, as of September 12. We also added the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 hedge funds as of the second quarter of 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Sigma Lithium Corporation (NASDAQ:SGML)

Average Analyst Price Target Upside as of September 12: 115.55%

Number of Hedge Fund Holders: 20

Sigma Lithium Corporation (NASDAQ:SGML) is a major player in the lithium industry, primarily focused on developing lithium resources in Brazil. It owns several properties in Minas Gerais, spanning around 185 square kilometers. The company has integrated strong ESG principles, achieving Net Zero in 2023, and focuses on environmental protection and community engagement. It is one of the most promising EV battery stocks to buy.

In the second quarter, the company strengthened its market position by increasing sales volumes and achieving prices 10% higher than its competitors. Sigma Lithium (NASDAQ:SGML) achieved notable operational and financial success in Q2, even with tough conditions in the lithium market.

The company ramped up its production to 22,000 tonnes every 30 to 35 days during the quarter, which proved its reliability as a supplier. The consistent performance helped the company secure favorable credit terms linked to exports. By being assertive in its sales approach, it was able to charge the higher prices discussed above, which shows its strong market position.

For the future, Sigma Lithium’s (NASDAQ:SGML) management discussed its strategic plan to expand production capacity to 100,000 tonnes of lithium carbonate equivalent (LCE) by 2026, at its latest earnings call. The company is executing this growth through a disciplined approach, focusing on one production line at a time.

The company plans to produce about 80,000 tonnes of LCE, or 520,000 tonnes of lithium concentrate, by next year. After reaching this goal, it will start building a third production line with a capacity of 250,000 tonnes of LCE.

In the second quarter, Sigma Lithium’s (NASDAQ:SGML) shares were held by 20 hedge funds with positions worth $89.137 million. Appian Way Asset Management is the company’s most significant shareholder with 2.6 million shares, worth $31.3 million, as of Q2.

Analysts are also quite bullish on the company as all four analysts that have covered the stock recently maintain a Buy-equivalent rating on the stock. The median price target of  $22.03 shows an upside of 115.55% to the company’s stock price as of September 12.

Overall SGML ranks 3rd on our list of the most promising EV battery stocks. While we acknowledge the potential of SGML as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SGML, check out our report about the cheapest AI stock.

Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.

Disclosure: None. This article is originally published at Insider Monkey.