Core Lithium Ltd (ASX: CXO) shares are off to a mixed start in December after underperforming last month.
Shares in the S&P/ASX 200 Index (ASX: XJO) lithium developer fell 0.7% on Thursday then rebounded to gain 2.2% on Friday. After posting gains of 1.5% in early trade today, the Core Lithium share price has reversed to be down 3.65% at the time of writing.
That leaves the stock down 2.58% so far in December.
But could the Core Lithium share price be in for a Santa rally?
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What headwinds has the ASX 200 lithium miner been facing?
December is traditionally a very strong month for stock markets.
However, with the ASX 200 having gained 6.1% in November, some analysts believe the broader market Santa rally may have come early this year.
Yet the same can't be said for Core Lithium shares, which lost 2.1% last month. That came despite a strong initial two weeks, which saw the miner's stock reach record highs on 14 November.
Core Lithium largely came under pressure over the following weeks on two fronts.
First, there were the COVID zero policy issues in China.
China is the world's top producer of EVs and hence represents a huge market for lithium, a critical element in the batteries that power EVs. With the world's most populous nation crippled by rolling lockdowns, investors sold off lithium stocks more broadly fearing a slump in demand for the battery-critical metal.
Second, a number of brokers, including Credit Suisse and Goldman Sachs, downgraded the stock in November. And Morgan Stanley reported it was bearish on lithium stocks more broadly, driven by the COVID protests going on in China.
Then there's Macquarie. Citing concerns that Core's flagship Finniss Lithium Project could be delayed, the broker downgraded Core Lithium shares to a neutral rating with a $1.80 price target.
Could Core Lithium shares be set for a Santa rally in December?
Now, here's why I believe Core Lithium could well enjoy a healthy Santa rally in December.
While Macquarie analysts have their concerns over the Finniss Project, Core Lithium has given no indication of any pending delays.
The miner announced it had transported its first spodumene direct shipping ore (DSO) product last month. And CEO Gareth Manderson said this was "a very positive step towards our objective to export from Darwin Port before the end of the year".
On 31 October, Core Lithium reported it was in a position "to safely advance Finniss towards first DSO shipments in Q4 CY22 and maiden spodumene concentrate in H1 CY23".
Barring any negative announcements from the miner, investor interest could well increase if Finniss progresses on schedule.
The other reason I think Core Lithium shares could enjoy a Santa rally is news out of China over the weekend that the government is drastically rolling back its strict virus control policies.
This could well boost investor sentiment regarding near-term lithium demand and help drive Core Lithium shares to outperform in December. As it stands, the stock remains up 178% over the past 12 months.
