Lithium shares White Hot: Albemarle rises late after Livent shoots up in revenue, outlook
Livent (LTHM) and Albemarle (ALB) only supercharged lithium stocks. Livent zoomed past expectations and massively raised the year-round guide on Tuesday night. The industrial giant Albemarle followed after late Wednesday.
The LTHM share shot up in Wednesday’s market share, flashing buy signals and gave a big boost to other lithium shares such as Albermarle. ALB shares rose on Wednesday night, while other lithium games continued to rise.
As prices rise for EV materials that are in short supply, MP materials (MP) is in print late Thursday. MP Materials, whose rare earth materials are used in permanent magnet motors, reports late Thursday.
With no new capacity online this year, Livent said all the upside comes from prices. “With our expectations for pricing throughout the rest of 2022 remaining the same today, Livent is increasing its guidance areas for the full year significantly,” CEO Paul Graves said at the earnings interview.
Cowen analyst David Deckelbaum upgraded the LTHM stock to give better results than the market result, raising the price target to 33 from 25. He mentioned increased visibility for growth and the extent to which Livent contracts are exposed to higher market prices.
Livent offered encouraging updates on several planned and previously unannounced expansions that were to increase capacity from 2023 onwards. The company aims to increase production fivefold by 2030.
Appropriations: Livent was expected to achieve an EPS of 13 cents per share compared to 2 cents a year ago, with revenue growth of 53% to $ 140.15 million.
Results: Earnings per share rose by 950% to 21 cents. Revenue rose 56% to $ 143.5 million, the second consecutive quarter of accelerating growth.
Outlook: Livent raised its year-round adjusted EBITDA guidance range to $ 290- $ 350 million, up 78% at mid-range from the previous $ 160- $ 200 million. Revenue should range from $ 755- $ 835 million, up 39% at the midpoint of the $ 540- $ 600 million range offered in mid-February.
LTHM Stock Action
The LTHM stock rose 30% to 28.55 on Wednesday, giving over the 50-day and 200-day lines. Livent broke a downward trend line from its all-time high of 33.04 on November 22 and also moved above the April 5 short-term high of 28.32. Both offered aggressive listings in LTHM shares.
Lithium shares also received a major boost from the Federal Reserve, as Fed chief Jerome Powell signaled that decision-makers are not actively considering 75 basis points for the June and July meetings.
Appropriations: Analysts expected Albemarle’s earnings per share to rise 49% to $ 1.64. Revenue increased by 22.5% to $ 1.02 billion.
Results: Albemarle’s earnings rose 116% to $ 2.38 per share. Revenue increased by 36% to $ 1.13 billion. Both were easily the best wins in many years.
Outlook: The lithium stock giant increased its 2022 outlook “based on expectations of continued demand growth and tightness in the markets it serves.” In other words, higher prices for lithium and bromine.
It raised the EPS target for 2022 to $ 9.25- $ 12.25 from $ 5.65- $ 6.65 previously, well above consensus. It predicted sales of $ 5.2 billion – $ 5.6 billion, well above impressions of around $ 4.41 billion.
ALB shares rose 17% overnight. That is after rising 9.3% on Wednesday to 215.47, and regaining the 50-day line, on Livent’s bullish outlook. The ALB stock is set to jump over the 200-day line, break a trend line and remove key resistance around 248, and offer more early listings.
MP Materials, after rising to record highs at the end of March, has lost a third of its value in the last month. On Wednesday, the MP share rose 2.7% to just above the 200-day line.
Why lithium stocks have suffered
The positive start to Q1 revenue is a welcome change. ALB, LTHM and most other lithium stocks have fallen this year. Chemical and Mining Society of Chile (SQM) is a notable exception, but it is partly due to the fertilizer business.
Albemarle’s disappointing earnings advice issued on 16 February triggered the sharpest decline for lithium stocks. Investors have seemed impatient with higher costs, production restrictions and contracts locked in at much lower prices.
Albemarle said at the time that only 10% of the supply is sold at Chinese spot market prices, which have increased by around 500% in the last year. The price for 40% of the supply is fixed, based on contracts obtained before lithium prices rose in 2021, Albemarle said.
EV ‘Freak-Out’ moments tower over lithium, rare earths
Lithium contract prices
Better news on the contract front would not be a surprise. If EV manufacturers are not intimidated by supplies of lithium and other important EV materials, they probably should be.
For example, Morgan Stanley’s Adam Jonas wrote in a note on March 21 that he expects a shortage of battery materials to limit Ford’s EV production to 500,000 vehicles by 2026, a quarter of the company’s official target. GM says it will have the capacity to build 2 million electric cars by 2025, half in North America and the other half in China. But Jonas sees 300,000 as realistic, not including the popular mini car in China.
Both carmakers told analysts last week that they have unlocked the lithium supplies they need through the middle of the decade. However, they probably expect new sources of lithium that have not yet proven scalable, such as the Salton Sea in California. Industry analysts are more cautious about the possibilities of quickly overcoming the technical challenges.
“Most car manufacturers’ EV plans have been developed without addressing the fundamental challenges of securing long-term supply,” Graves told analysts.
“As a result, there has been a great deal of haste in procuring batteries, and in parallel with a growing recognition that there is a fundamental shortage of lithium available in the market for at least the next few years.”
For the most part, lithium supply agreements have been handled by the car manufacturers’ battery partner companies. But that is changing, he said. Car manufacturers “are becoming much more involved in the talks on procuring battery material, and they are seeking to sign commitments directly with suppliers of battery material that will be far more important in the market in the 2024 or 2025 time frame.”
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