Lithium has become increasingly popular, given zero-emission initiatives worldwide and the growing electric vehicle (EV) market. Lithium is a key component used in electric vehicle (EV) batteries. The U.S. is narrowing the gap with China, which dominates the $46 billion lithium-ion battery industry, supported by President Biden’s emphasis on EV growth and significant investments by its automotive industry giants. Consulting firm AlixPartners expects companies to invest $330 billion globally in the EV supply chain over the next five years.
Lithium prices are skyrocketing, driven by heightened demand. The Mineral Intelligence index of lithium carbonate and hydroxide prices has more than doubled over the past year. In addition, the Global X Lithium & Battery Tech ETF (LIT) has gained 108.1% over the past year compared to the 32.4% gains of the broader SPDR S&P 500 ETF Trust (SPY) over the same period.
Hence, we think it could be wise to invest in fundamentally sound lithium stocks Albemarle Corporation (ALB), Livent Corporation (LTHM), and Lithium Americas Corp. (LAC) to take advantage of the rising prices.
Albemarle Corporation (ALB)
ALB is a worldwide manufacturer of engineered specialty chemicals, which operates through Lithium; Bromine Specialties; and Catalysts segments. Its Lithium segment produces lithium compounds and lithium specialties to be used in a variety of goods. ALB is based in Baton Rouge, La.
On October 22, ALB declared that it had signed investment agreements to expand its lithium conversion capacity in the Chinese provinces of Jiangsu and Sichuan. The agreements align with the company’s expansionary strategy in China and commitment to invest in new capacity to promote growth.
In September, ALB subsidiary Albemarle Lithium UK Limited signed an agreement to acquire all the outstanding equity of lithium converter firm Guangxi Tianyuan New Energy Materials Co., Ltd. “As the global transition to cleaner energy rapidly develops, this added lithium capacity will enable us to help our customers achieve their growth and sustainability ambitions,” said Kent Masters, Albemarle CEO.
In its second fiscal quarter, ended June 30, ALB’s net sales increased 1.3% year-over-year to $773.90 million. Its net income attributable to ALB improved 395.9% from the same period last year to $424.60 million. Its adjusted EBITDA and adjusted EPS came in at $194.63 million and $0.89, respectively, up 5.1% and 3.5% year-over-year.
A $5.34 consensus EPS estimate for its next year (fiscal 2022) indicates a 46.7% year-over-year increase. Likewise, the $3.82 billion consensus revenue estimate for the coming year reflects a 17.8% rise from the current year. Also, ALB has an enviable earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 144.3% in price over the past year and 58.7% year-to-date to close yesterday’s trading session at $234.16. It is currently trading above its 50-day and 200-day moving averages of $227.45 and $191.90, respectively, and 7.5% below its 52-week high of $253.10.
Livent Corporation (LTHM)
LTHM is an international marketer of performance lithium compounds used in a broad range of goods that include lithium-ion batteries, lightweight materials for aerospace applications, and non-rechargeable batteries. It also produces lithium compounds, used as feedstock in the creation of performance lithium compounds. LTHM is based in Philadelphia, Pa.
On June 10, LTHM priced a public offering of 13 million common stocks at $17.50 per share. The $219.40 million in net proceeds is intended to be used by the company to expand its lithium capacity and for general corporate purposes.
LTHM’s revenue increased 57.5% year-over-year to $102.20 million in its fiscal second quarter, ended June 30. Its adjusted EBITDA improved 150% from the prior-year quarter to $16 million. Its adjusted after-tax earnings stood at $7.80 million, increasing substantially from its negative year-ago value, while its adjusted after-tax earnings per share came in at $0.04 for the period.
The Street’s $0.04 EPS estimate for the current quarter (ending December 2021) reflects a 300% year-over-year rise. Similarly, the Street’s $97.27 million revenue estimate for the current quarter indicates an 18.3% improvement from the same period last year.
LTHM’s stock has gained 134.1% in price over the past year to close yesterday’s trading session at $25.68. It has gained 36.3% year-to-date. The stock is currently trading above its 50-day and 200-day moving averages of $24.67 and $20.82, respectively, and 6.4% below its 52-week high of $27.45.
Lithium Americas Corp. (LAC)
LAC is a resources company that explores for lithium deposits. It owns interests in the Cauchari-Olaroz project in Argentina and the Thacker Pass project in Nevada. The company is headquartered in Vancouver, Canada.
On October 7, LAC provided updates on its Thacker Pass project, reflecting an increase in targeted capacity. The company also increased its mineral resource estimate of lithium carbonate from the project. This development demonstrates the company’s optimized mine plan and leaching efficiencies.
For the six months ended June 30, LAC’s net cash provided by financing activities climbed 1,058.3% year-over-year to $405.59 million. Its cash and cash equivalents balance stood at $505.24 million, registering a 916.2% increase from the same period last year. Analysts expect its EPS to increase 65% year-over-year in its next year (fiscal 2022).
The stock has gained 135.9% in price over the past year and 106.8% year-to-date to close yesterday’s trading session at $25.95. The stock is currently trading above its 50-day and 200-day moving averages of $22.64 and $16.75, respectively. It is trading 9.7% below its 52-week high of $28.75.
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ALB shares were trading at $231.55 per share on Friday afternoon, down $2.61 (-1.11%). Year-to-date, ALB has gained 57.98%, versus a 22.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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