Electric vehicle stocks have been some of the hottest investments in the market in the past couple of years as investors anticipate a multi-decade boom in EV sales. Bank of America analyst Joon-Ho Lee said Friday he's also bullish on stocks with exposure to the EV battery value chain.

Indicator At Record Highs: The Bank of America Global EV Battery Value Chain Indicator is an indicator based on 20 industry-specific factors, including car sales, battery demand and raw materials prices. Lee said the indicator’s current reading suggests EV battery revenue growth will accelerate in the near term.

“The current reading of our indicator shows a continuation of the uptrend that began in early 2020, suggesting accelerating revenues in the coming quarters,” Lee wrote in a note.

The EV battery indicator hit its all-time high in July and remained at peak levels in August, he said.

The latest reading confirms two themes Lee observed during Bank of America’s recent Future Mobility Virtual Forum event.

First, Lee said there is strong growth within the domestic U.S. EV market. In addition, he's observing secular growth in EV battery materials firms as another round of capital expenditures kicks in. Lee is expecting battery supply shortages could start hitting the industry by 2025.

How To Play It: Despite Lee’s bullish outlook on the industry as a whole, Bank of America is bearish on the valuations of U.S.-listed EV battery investments. Here are its ratings and price targets for popular battery stocks:

• Albemarle Corporation  (ALB), Underperform rating and $208 target.
• Livent Corp (LTHM), Underperform rating and $19 target.
• Sociedad Quimica y Minera de Chile (SQM), Underperform rating and $38 target.
• Tesla Inc (TSLA), Neutral rating and $800 target.

Benzinga’s Take: There’s no question there will be a massive boom in EV battery demand over the next 20 years. The only question for investors is just how much of that boom is already priced into battery stocks after huge rallies in recent years.