What happened
Shares of Livent (LTHM +0.00%), which reported beats on both sales and earnings last week, are on the rise again Tuesday, up a solid 11% as of 12:30 p.m. EDT.
You can thank Wall Street for that.
Image source: Getty Images.
So what
In a flurry of news developments, first Livent saw its stock upgraded from sell to hold by Vertical Research Partners yesterday. Then Citigroup raised its price target on the stock from $22 to $25, reports TheFly.com. Last but not least, we learned this morning from StreetInsider.com that Bank of America has announced a price target hike of its own.
But as it turns out, that's the bad news.
Although Vertical Research sees Livent stock as worth $22 after its earnings beat last week, and Citi now says $25, Bank of America raised its price target on the lithium mining stock to only $18 -- and reiterated its underperform rating, indicating that, in BofA's opinion at least, Livent stock remains a sell.
Now what
By my count, that works out to two votes in favor of Livent and only one against -- which is probably why its stock is flying higher today. But even so, I think some caution here may be warranted.
Yes, lithium metal prices seem generally higher this year than they were last year, and with more electric car producers than ever now producing more new models than ever before, demand for lithium does seem likely to increase over time. Still, consider the numbers:
Even in a stronger demand environment, Livent remains unprofitable and free cash flow negative at last report, with generally accepted accounting principles (GAAP) net losses of $11 million and cash burnt over the past 12 months of $38 million. Until Livent proves that it can capitalize on strong global demand for lithium by transforming that demand into strong profits for itself, I fear Bank of America has the better of this argument -- and investing in Livent remains a risky bet.
