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Why Lithium Stock SQM Rocketed 14% Today

By Neha Chamaria – Nov 22, 2021 at 2:04PM

Key Points

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SQM is betting big on the electric vehicle industry and lithium.

What happened

Chemicals and lithium stock Sociedad Quimica y Minera de Chile (SQM -2.19%) soared on Monday, climbing nearly 9.6% as of 12:50 p.m. ET after surging as much as 14.2% earlier in the day. With at least three analysts turning bullish about SQM stock, investors aren't waiting to load up on the stock.

So what

SQM sells specialty plant nutrition (SPN), iodine, lithium, potassium, and other industry chemicals. The company announced its third-quarter numbers on Nov. 17, and although its revenue and earnings missed consensus estimates, SQM clocked solid growth in both its top and bottom lines. More importantly, SQM sees its lithium sales soaring on the back of rising global demand for electric vehicles. EVs run on lithium-ion batteries, and demand is so strong that lithium was the second-largest revenue-generating product for SQM in Q3 after SPN, accounting for nearly 28% of its total revenue.

A person plugging a charger into an electric car.

Image source: Getty Images.

SQM's lithium sales volumes jumped 80% year over year during the nine months ended Sept. 30, and while the company is already producing 120,000 metric tons per year, it is aggressively ramping up capacity to hit 180,000 metric tons in 2022.

More notably, SQM expects to sell 100,000 metric tons of lithium this year. Until the first quarter, it projected roughly 85,000 metric ton sales for the year.

Multiple analysts have raised their price targets on SQM stock since its earnings release.

Analyst Joel Jackson at BMO Capital raised his target on SQM stock to $80 a share from $65 per share, citing compelling valuation relative to lithium stock Albemarle (ALB -4.01%) and the highest potential upside for SQM among peers to increase lithium volumes and prices in 2022. For perspective, SQM shares continue to hugely underperform Albemarle -- the world's largest lithium mining company -- this year despite today's gains.

SQM Chart

SQM data by YCharts

Deutsche Bank analyst Corinne Blanchard upped SQM's price target to $73 a share from $70 per share given the company's better-than-expected outlook for the fourth quarter.

Citi values SQM even higher, with analyst P.J. Juvekar raising the price target to $83 per share from $70 a share on the back of a "decent quarter" driven by strong prices for lithium and fertilizer segments, in particular. SQM shares are hovering around $69 a share as of this writing. 

Now what

SQM expects to realize 50% higher sequential prices for lithium in the fourth quarter. That, coupled with the recent surge in global potassium prices, means SQM should end up reporting a record fourth quarter. With its lithium revenue in particular nearly doubling over the first nine months of the year and the explosive electric vehicle market only getting started, SQM stock is unsurprisingly winning analysts' -- and investors' -- attention. 

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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