Livent Corp. (LTHM, $28.22): “Livent it Up”
By: John
Bender, AIM Student at Marquette University
Summary
• Livent Corporation (NYSE:LTHM) is a performance grade lithium compound
producer that specializes in the production of battery-grade lithium hydroxide,
butyllithium, and purity lithium metal.
• Livent has significant exposure
to foreign markets with a large portion of production of their lithium
hydroxide coming from their Argentina location.
• Revenues declined by $100
million from 2019 to 2020 due to significant impacts from covid-19 on
production and consumer demand.
• Management issued 14,950,000 shares
of common stock on June 9, 2021, at a maximum offer price of $17.50 generating $227.5
million in capital.
• Livent announced a recent
extension on their multi-year supply deal with Telsa which increased their
output through 2021.
Key points:
Livent’s equity issuance in June
2021 is being used to expand capacity in Argentina and the United States. With
their extension of their supply agreement with Telsa at increased outputs
Livent is expanding production in Argentina to meet Telsa’s increased demand
for lithium-ion batteries.
Usually, this equity issuance
would be a turnoff as it would seem to say that Livent’s management believes
the stock is overpriced. However, due to covid-19’s impact on the company’s
cash provided from operating activities dropping to $6.3 million in 2020 from
$58.1 million. Along with this Livent already increased their long-term debt in
2020 to $251.50 million so Livent’s only way of raising capital was an equity
issuance.
Livent’s biggest risks to date are
foreign market exposure and reliance on electric vehicle demand. While Livent
is a US based company they have production facilities around the globe in North
America, Europe, Asia, and Latin America. These countries have varying
governments which was seen through the pandemic as Livent faced various
restrictions which slowed production in 2020. Reliance on EV demand while a
risk is also the biggest driver for this stock as demand for EV has continuously
increased over the last 5 years and is expected to continue its current trend.
Telsa’s recently announced deal
with Hertz in which Hertz will buy 100,000 EVs is a great sign for Livent. The
new supply deal indicated increased output to Telsa, and this deal goes in line
with this. This increased demand could also cause the price for lithium-ion
batteries to increase as supply lags at picking up the quickly increasing
demand. Being able to increase prices and supply larger quantities of lithium-ion
batteries could continue to driver Livent to new 52 week highs.
What
has the stock done lately?
Since Livent’s stock issuance in
June which declined the stock price by 18% from $21.17 to $17.35. Since Livent’s
stock has increased by 62.65% from $17.35 to $28.22. This was in large part due
to a faster than expected recovery which showed in their Q2 Earnings report
where the beat the consensus estimate of $0.02 EPS reporting $0.04 EPS.
Past
Year Performance:
LTHM’s stock has increased 162.51%
in value over the past year, from $10.90 to $28.22. The stock is set to release
Q3 FY’21 Earnings Report on November 4th, 2021, in the after-market
hours. The consensus estimate for Livent’s earnings is $0.04 per share.
My
Takeaway
Livent’s stock price is heavily
reliant on the demand for lithium-ion batteries in electric automobile production.
This industry has seen increasing demand over the last 5 years causing their share
price to skyrocket. However, the demand only seems to be increasing which is bullish
for Livent. If Livent can maintain its market share amid growing competition the
stock will continue to outperform the market.
