Thursday, December 9, 2021

A Small Cap Equity holding: Livent Corp. (LTHM, $28.22): “Livent it Up” By: John Bender, AIM Student at Marquette University

 Livent Corp. (LTHM, $28.22): “Livent it Up”

By: John Bender, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


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.

Source: FactSet

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.

Source: FactSet