Lithium Supplier Stock Livent Soars 15,2% on Deal With Tesla (7.11.2020)

Lithium producer Livent reported a third-quarter loss on Thursday evening. But there was a more important takeaway for electric vehicle investors: Livent and Tesla added to an existing lithium supply agreement, providing Tesla with additional access to high-quality battery material supplies.

The news has Livent (ticker: LTHM) shares soaring, up 12.9%, at $13.30, in midday trading Friday.

Livent lost eight cents a share, reporting $72 million in sales. Wall Street was looking for break-even results from $68 million in sales. A loss isn’t great news, but prices for lithium hydroxide—a key commodity that Livent sells and is used in EV batteries—are down about 11% year to date and 70% from 2016 highs. Global lithium mining capacity has ramped up faster than the demand generated by electric vehicles, pressuring prices.

But electric vehicle demand is on the rise, and EV producers such as Telsa (TSLA) are moving to secure lithium supply to ensure they have enough batteries to meet production targets.

On Thursday, Livent reported the company extended its lithium hydroxide agreement with Tesla through 2021 at higher volumes than in 2020. Lithium hydroxide is a higher-quality lithium product that enables better EV range and performance. “We continue to discuss the framework for a long-term supply relationship with Tesla,” added Livent Chief Financial Officer Gilberto Antoniazzi on the company’s earnings conference call.

“Tesla remains a clear leader in the EV industry and increasingly in the battery industry,” added CEO Paul Graves. “We are proud to be their partner.” He is optimistic about the outlook for EV volumes in the future and is working to ensure lithium doesn’t become a bottleneck for EV production.

Tesla, earlier this year, singed a supply agreement with small-cap development-stage lithium miner Piedmont Lithium (PLL). Graves believes there will be more auto-lithium partnerships announced in coming years.

Barron’s recently wrote positive about lithium miners, believing commodity prices and volumes would rise as EV demand around the globe grows. Since the article appeared in early October, Livent stock is up about 36%.

Year to date, Livent shares are up more than 50%, better than comparable returns of the S&P 500 and Dow Jones Industrial Average. Over the past few quarters the stock has been very volatile around earnings, moving double-digit percentages, up or down, several times.

Write to Al Root at [email protected]