Shares of lithium technology company Livent (NYSE:LTHM) were up more than 10% on Wednesday before closing with a 7% gain, after Raymond James initiated coverage with a strong buy rating and $9 price target, 18% higher than Tuesday's closing price of $7.63.
Raymond James analyst Pavel Molchanov believes that growth in battery electric vehicles (EVs) and other industrial uses will lead to significant jumps in revenue and earnings for Livent in 2021.
Demand lagged in recent months as auto manufacturers suspended operations and other industries were impacted by the coronavirus pandemic. CEO Paul Graves said the pandemic caused "serious disruption and uncertainty throughout [automotive] supply chains," and all other end-markets also had broader weakness.
Molchanov believes that once EV sales and other markets ramp back up to full production, Livent could see revenue grow by over 30%, and adjusted EBITDA could double.
The company said in its second-quarter earnings release that it expects near-term demand weakness to continue, but in the longer term it will benefit from significant growth in EVs.
The company noted that some mining restrictions due to the pandemic have led to a slowdown in supply growth. It also sees the recent drop in demand, which weakened lithium pricing, leading to some mining projects and expansions being suspended or canceled. Livent believes this will "create a shortage of battery qualified lithium materials in the coming years," leaving the company well positioned to benefit.