Lithium miner SQM is the IBD Stock Of The Day. SQM stock offers two different entry points ahead of its second-quarter results next week.
Other lithium stocks also moved higher on Monday, including Albemarle and Livent, which reported strong earnings last week. Lithium prices have soared over recent months, amid high demand for electric vehicles and the batteries that use the white metal. Concerns have grown over whether there's currently enough of the material available to meet that demand.
SQM Stock
Shares of Chile-based Sociedad Quimica Y Minera rose 3.55% to 96.08 in the stock market today. The official cup-base buy point is 116.86. But SQM stock has an early entry of 99.84 from a handle that's slightly too low to be a proper buy point. Investors could also enter even lower, around 98, from a downward-sloping trendline.
SQM stock has a best-possible Composite Rating of 99. Its EPS Rating is 84. Shares bounced from their 50-day line on Monday.
SQM Earnings
SQM reports second-quarter earnings on Aug. 17. In May, when the company reported first-quarter earnings, management noted "higher prices in all our business lines" and production levels that had nearly tripled. SQM earnings skyrocketed 973% in Q1 as revenue leapt 282%.
Lithium is the biggest revenue driver, but SQM also produces fertilizers. Fertilizer prices soared earlier this year but have come down from highs.
'Limiting Factors'
The complicated process of extracting lithium from the ground can make it difficult for production to keep apace with demand.
During an earnings call in April, Tesla CEO Elon Musk said "mining and refining lithium appears to be limiting factor" for expanding sustainable energy.
"Can more people please get into the lithium business?" he said later during that call. "Do you like minting money? Well, the lithium business is for you."
Another factor: The new tax/health care/climate legislation that just passed the Senate includes new EV credits that will require an increasing share of battery materials to be mined or processed in the U.S. or by its key trade partners.
Albemarle stock rose 2.9% to 244.84 on Monday, after hitting 253.57 intraday. Shares are below a 273.78 buy point of a deep cup-with-handle base. But that 31%-deep handle could be seen as its own base. On a weekly chart, ALB stock briefly got above a 250.25 buy point from a handle within that larger handle.
Albemarle last week hiked its full-year profit outlook sharply for the third time in about three months, citing in large part higher lithium prices.
Livent stock jumped 5.4% to 26 on Monday, regaining its 200-day line. LTHM stock is a long way from a 34.71 buy point.
Livent also raised its forecasts last week. The company recently entered into a supply agreement with General Motors. But it noted the pressures on that supply.
"The challenges are increasing for the lithium industry to grow battery-grade lithium hydroxide and carbonate supply enough to keep up with significant annual demand increases," Livent CEO Paul Graves said in a statement last week.
"As a result, auto (original equipment manufacturers) are becoming more focused on securing reliable lithium supply to support their own aggressive electrification plans," he said.
