Albemarle and Livent reported solid earnings this past week, sending shares higher. Above, a scientist works on lithium battery research at an Albemarle facility in North Carolina.
Logan Cyrus/Bloomberg
Lithium is the metal at the center of the electric vehicle revolution and shares of lithium producers have beaten the market for years.
Not so on Friday.
Shares were down, a lot, leaving investors to wonder what was going on. But there doesn’t seem to be an obvious reason, other than investors getting too much of a good thing.
Stock in
Albemarle
(ticker: ALB), the world’s largest lithium producer, was off 10% in midday trading Friday. The
S&P 500
and
Nasdaq Composite
were down 0.8% and 1.1%, respectively.
It isn’t just
Albemarle.
Shares of
Livent
(LTHM) and
SQM
(SQM) were off 7.6% and 7.5%, respectively. And shares of start up lithium producers
Piedmont Lithium
(PLL) and
Lithium Americas
(LAC) were down 10.7% and 5.4%, respectively.
Most of the news from the sector has been good. On Thursday,
Lithium
Americas announced the closing of a $650 million investment from
General Motors
(GM). Coming into Friday trading,
Lithium Americas
stock was up 15% since the GM agreement was announced. Now it has given back 40% of that gain just on Friday.
Thursday also saw
Piedmont Lithium
announce an offtake agreement with
LG Chem
(051910.Korea) that sent Piedmont shares up 1.3% to $73.46. Shares on Friday were about $7.40 below the pre-deal level.
Albemarle
and
Livent
reported solid earnings this past week that sent shares of both companies higher. Oppenheimer analyst Colin Rusch, who called Albemarle’s results “comforting for bulls” in a Friday note, rated Albemarle shares a Buy and has a $498 price target for the stock.
And Lithium came up on the
Mercedes-Benz
(MBG.Germany) fourth-quarter earnings conference call on Friday. Comments were essentially bullish.
“If you ask me where is the strategic challenge for the overall raw material market…I think it is the pace of lithium extraction and refining,” said CEO Ola Kallenius. “It’s not the only challenge, but that is maybe the one that has the biggest ramp. Because if you put all the ambitions of all the car companies on top of each other, if you look at what the current level of production is, a lot needs to happen between now and the end of the decade and into the next decade.”
There haven’t been any analyst downgrades or target cuts to speak of. Prices for lithium are down about 20% from November peaks, but that isn’t new. What is more, pricing remains up about 650% from prepandemic levels.
The pricing is up because more EVs are being made and EVs need lithium ion batteries. That dynamic has helped stocks of lithium producers. Albemarle,
Livent,
and SQM have gained about 180% and 250% over the past three years. The S&P 500 is up about 20% over the same span.
Maybe investors are just taking profits. The Albemarle drop snaps a five-day winning streak for shares. Whatever the case, investors and EV bulls will be watching what comes next closely.
Write to Al Root at allen.root@dowjones.com
Credit: marketwatch.com