Is PMET a buy?

Lithium stocks were a big hit in recent years, right up until they weren’t — the sector saw a big pullback in 2022 and stocks have yet to recover.

But with states worldwide pushing hard on policies to wean societies off fossil fuels, reliance on more and more manufacturing of electric vehicles (EVs) will only grow, and that means demand batteries and their materials — lithium, for one — will only keep increasing.

That’s good for investors interested in Canadian miner Patriot Battery Metals (Patriot Battery Metals Stock Quote, Charts, News, Analysts, Financials TSXV:PMET), whose share price has gone from hot to hotter over the past 12 months.

Patriot owns the Corvette Property in the Eeyou Istchee James Bay region of Quebec whose lithium deposits are bringing a lot of interest in the company. Earlier this year, PMET’s stock shot up on results from Patriot’s drilling campaign at Corvette, which the company said produced its highest grade lithium drill intercept to date.

“It is hard to find words to adequately describe the impressive nature of the lithium mineralization in drill hole CV22-083,” said VP exploration Darren Smith in a news release. “Visual estimates of spodumene abundance may give you a sense, but assays are the true measure and have certainly astounded with this hole.”

As for PMET, the company currently has about 93 million shares outstanding and about 40 million warrants and options for fully diluted shares at about 137 million. Its market cap currently stands at about $1.0 billion.

As of the end of its fiscal Q3 2023, ended December 31, 2022, the company had $54 million in total assets versus $10 million in total liabilities. Along with its Corvette Property, Patriot has a range of other properties for lithium and gold exploration in areas such as Idaho, Northwest Territories and a number of other James Bay Region properties.

In February, Stifel GMP analyst Cole McGill raised his target on PMET to $16.00 from $8.25, saying the potential at Corvette is cause for more optimism.

“Thanks to recent exploration success and positive results from metallurgical testing, we now have greater visibility in a future development scenario at Corvette and subsequently have updated our model using a discounted cash flow analysis to arrive at a new target price of $16.00/share,” said McGill.

“We are keeping our Speculative Buy rating on the stock and highlight scenarios that could lead to an even higher valuation, including significant resource growth along with strategic investments and/or outright acquisition,” he wrote.

According to TipRanks, PMET has a consensus rating of Moderate Buy and 12-month price target of $16.38.