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Why Livent Stock Popped Again Tuesday

By Rich Smith - Mar 2, 2021 at 4:16PM

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An upgrade for one lithium miner makes investors optimistic about another.

What happened

For the second day running, shares of Livent Corporation (LTHM 6.16%), a miner of lithium metal used in the production of electric car batteries, are running higher. Up 11% at one point this morning, Livent shares are hanging onto a 2.6% gain as of 3 p.m. EST.

Curiously, Livent probably owes its success today (and yesterday) to good news concerning its competitor, Albemarle (ALB 5.70%).

Lithium salt evaporation ponds

Image source: Getty Images.

So what

Yesterday, Albemarle caught an upgrade from the analysts at Loop Capital. In that note, Loop argued that after reviewing Albemarle's fourth-quarter earnings report, which came out in the middle of last month, it has become "incrementally more positive on ... Albemarle," reported this morning.

Both sales and earnings declined at Albemarle, for both Q4 and for 2020 as a whole. Nevertheless, Albemarle management forecast as much as a 6% increase in revenue for 2021, with at least the potential for earnings to grow as well. (Free cash flow, however, will go even more negative -- about $375 million at the midpoint of the estimates Albemarle provided.)  

Now what

It seems to be Albemarle's sales growth that Loop is focusing on, and extrapolating from it, the analyst says it is also feeling more positive about the lithium industry in general -- not just Albemarle specifically.

Is that justified?

"With EV adoption accelerating globally," explains TheFly, Loop is getting better "visibility" into the potential for an "inflection" in the fundamentals of lithium production (i.e., the industry's ability to produce the stuff profitably). That being said, investors need to be aware that while Albemarle -- which was at least profitable last year -- is looking at potentially greater profits in 2021, Livent actually lost money in 2020. So while a mistake in Loop's thinking might only mean a bit less profit for Albemarle in 2021, a mistake in Livent's case could mean continued losses for that stock.

Long story short: The risk looks greater for Livent.

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Stocks Mentioned

Livent Corporation Stock Quote
Livent Corporation
$27.76 (6.16%) $1.61
Albemarle Corporation Stock Quote
Albemarle Corporation
$239.23 (5.70%) $12.91

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