Lithium products producer Livent Corporation (NYSE: LTHM)
stock has been a participant in the electric vehicle (EV) revolution
led by key customer Tesla (NASDAQ: TSLA)
. While lithium prices are still well below their 2018 peaks, the future demand can’t be overlooked amidst the still limited supply. The average EV requires from 5,000 to 10,000 times more lithium than a smartphone. Europe’s largest automaker Volkswagen (OTCMKTS: VWAGY)
(with over 19 million cars produced in 2019) plans to have all its vehicle models be electric by 2030. Big Three automaker Ford Motor (NYSE: F)
has vowed its entire passenger line to go EV by 2030. General Motors (NYSE: GM)
has targeted 2035 for an all EV vehicle portfolio. That’s just the start of the massive demand
for battery-grade lithium. It’s no wonder that markets are in a frenzy speculating on lithium miners that have yet to produce
any lithium yet. Livent is an all-in player for lithium hydroxide (LiOH), which adds an extra $2,000 per ton to process but provides more capacity. Tesla vehicles uses LiOH batteries supplied by the Company. Risk-tolerant investors looking to gain exposure with a key player in LiOH can watch for opportunistic pullback levels for exposure.
Livent currently produces LiOH from its brining operation in Argentina. It also owns a 25% stake in New Nemaska Lithium, a failed lithium mining project that went bankrupt during the lithium pricing collapse from $21.5Kt in 2018 to $8.1Kt in 2020. The ownership comes from a joint venture that took over the Whabouchi Lithium Mine in Quebec, Canada. The mine has an estimated reserve of 36.6 Mt throughout its 33-year mining lifespan. The high-grade spodumene mine is expected to resume production in 2021. Livent currently produces approximately 25,000 tonnes of lithium but plans to expand production to 60,000 tonnes by 2025. Livent extended its LiOH supply agreement with Tesla through 2021 and is working to lock in a multi-year supply agreement beyond 2021. Livent is a subsidiary of agricultural sciences company FMC Corporation (NYSE: FMC) which still owns 85% of the Company.
Q4 2020 Earnings Release
On Feb. 18, 2021, Livent released its fiscal fourth-quarter 2020 results for the quarter ending December 2020. The Company reported an adjusted earnings-per-share (EPS) loss of (-$0.02) excluding non-recurring items versus consensus analyst estimates for a profit of $0.02, missing estimates by (-$0.02). Revenues grew 4.8% year-over-year (YOY) to $82.2 million, missing analyst estimates for $82.77 million. The Company announced a multi-year supply agreement with BMW Group for both lithium carbonate and LiOH. Deliveries will before in 2022. The Company expects the strong growth in EVs that bolstered positive lithium market conditions in Q4 2020 to continue throughout 2021. Livent expected full-year 2021 revenues in the range of $335 million to $365 million compared to $350.85 million consensus estimates. The Company also expects lowers costs in 2021 driven by reduced third-party carbonate usage.
Conference Call Takeaways
Livent CEO, Paul Graves, commented on pricing, “The 2021 bulk of our contracted volume are on the same basis with firm volume and price commitments. However, compared to prior years, we have a larger portion of our contracted volume subject to price adjustments during the year. Some of this is subject to index-based price adjustments, which mean that prices are adjusted on a formula basis relative reports of price indices. Given these indices are published on a lagging basis, it typically takes a quarter or two for movements in reference to indices to impact our realized process. In addition, we have also elected to enter into some volumes that are subject to monthly or quarterly renegotiation of price, primarily relating to the second half of the year. This was done intentionally on our part, allowing us the opportunity to take advantage of any price increases.” This is great news especially as lithium prices are rebounding and rising again. CEO Graves gave many examples of the new electrification initiatives by major economies and countries. Notably, he highlighted the “U.S. announcement to replace all 645,000 vehicles in the U.S. federal fleet with domestically produced EVs”. CEO Graves estimates global demand to exceed 1 million tonnes or three times today’s levels to occur sooner than the previously forecasted date of 2025 powered by EVs and clean energy storage solutions. Prudent and risk-tolerant investors looking for exposure can watch for opportunistic pullback levels here.
SQM Opportunistic Pullback Levels
We use the rifle charts
on the monthly and weekly charts to provide a wider time frame price analysis for shares of LTHM. The monthly rifle chart has been uptrending with a stochastic mini pup with a rising 5-period moving average (MA) at $16.61. Shares peaked off the $23.59 Fibonacci (fib) level.
The monthly upper Bollinger Bands (BBs) sit at $21.41. Since the current and prior monthly candles indicate highs within $0.50 of each other, it’s too early to determine is a lower high has been completed but lacking a new high, these can be considered tweezers. The daily rifle chart formed a market structure low (MSL)
buy trigger above $19.76, while the weekly rifle chart formed an opposite market structure high (MSH) sell triggered below $17.93. The weekly rifle chart has stalled its uptrend as the 5-period MA has flattened at $20.41 while the 15-period MA continues to rise near the $18.77 fib. The weekly stochastic peaked and formed a mini inverse pup falling under the 80-band. This sets up a make or break where the initial channel tightening to the weekly 15-period MA is in the cards before a rebound to retest the 5-period MA. Ultimately the stock will either form a new leg higher on a pup breakout if the weekly stochastic crosses back up, or breakdown on a 5-period MA crossover through the 15-period MA on a full stochastic oscillation down. Risk-tolerant investors can monitor opportunistic pullback levels at the $17.93 weekly MSH, $16.27 fib, $15.01 fib, $14.47 sticky5s and the $12.66 fib.
Upside trajectories range from the $26.16 fib up towards the $32.43 fib. It’s prudent to monitor the price action among the peers Albermarle Corporation (NYSE: ALB)
, Sociedad Quimica y Minera (NYSE: SQM)
, Lithium Americas (NYSE: LAC)
and Piedmont Lithium (NYSE: PLL)
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