Lithium stock Livent is Thursday's IBD Stock Of The Day as the key ingredient in EV batteries keeps defying Wall Street predictions of a big price drop. LTHM stock, which has been on a roller-coaster ride all year, has regained a key support level and could be poised for another move higher.
Lithium Price Outlook
The spot price for lithium carbonate in China rose to nearly $78,000 per ton this week, an all time high and up about 130% on the year.
That follows a prediction from Morgan Stanley earlier this month that the current lithium supply deficit will turn to a surplus next year. By 2024, spot lithium prices would fall by about 75%.
Other industry specialists have panned predictions like Morgan Stanley's, arguing that optimistic lithium supply projections almost never pan out. Mining timelines get pushed out and quality issues often arise.
Still, lithium stock skeptics have another arrow in their quiver now. The issue isn't just a potential oversupply, but a coming hit to demand from a possible global recession.
On Oct. 17, JPMorgan analyst Jeffrey Zekauskas started coverage of Livent with a neutral rating and 28 target. He wrote that global economic weakness could slow the fast-growing EV market, easing tight lithium supplies.
Livent Earnings Next Week
Livent is set to report Q3 earnings after the close next Tuesday. In a preview, Deutsche Bank analyst Corinne Blanchard wrote that Livent "has been relatively conservative in its contract structure," with limited exposure to spot prices. However, with increased capacity coming online from its Argentina operations, Livent may get more exposure to higher prices, she wrote.
Along with its Q2 earnings report on Aug. 2, Livent raised full-year revenue guidance to a range of $800 million to $860 million, up from $755 million to $835 million.
Livent also said an additional 10,000 metric tons of lithium carbonate capacity in Argentina is on track for commercial production by the first quarter of 2023. In addition, a 5,000-metric-ton expansion of lithium hydroxide capacity in Bessemer City, N.C., should enter commercial production during Q4 of this year. A further 10,000-metric-ton expansion in Argentina, targeted for the end of 2023, would nearly double Livent's 2021 capacity.
The company also said it expects to add 15,000 metric tons of capacity in China at a new location by the end of 2023.
LTHM Stock
LTHM stock dipped 0.3% to 31.26 in Thursday afternoon stock market action. Still, Livent stock is holding right at its 10-week and 50-day moving averages.
LTHM stock is about 15% below its all-time high on Sept. 9. A solid jump above its 50-day line could offer an early entry point. Buying ahead of earnings isn't advised, although a solid pre-earnings options-trading strategy is a good way to limit risk.
Among other lithium stocks, Albemarle rose 0.3% to 283.02, edging above its 50-day moving average. Albemarle earnings are due next Wednesday afternoon.
SQM stock rose fractionally, remaining glued to its 50-day line.
