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Electric Vehicle Sales Outlook Down, Time To Sell Livent

Mar. 09, 2020 9:09 AM ETLivent Corporation (LTHM)6 Comments
Harrison Schwartz profile picture
Harrison Schwartz


  • Livent has rallied despite fundamental deterioration in its production growth and in lithium prices.
  • My past bullish case for lithium is nullified due to the Coronavirus' likely impact on EV production and sales.
  • Given Livent's expected continued EPS decline, the stock should be trading at a much lower valuation.
  • The stock's spike last Monday was likely a bull-trap.
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In November, I covered Livent Corp. (NYSE:LTHM) which is a rapidly growing producer of lithium. Since the article was written the stock has rallied slightly over 20% and I believe it would be a good time to take profits or even reverse short the stock.

The major catalyst for my long position was an expected rise in lithium prices backed by the rising production of electric vehicles and slow supply growth. While the stock has rallied, lithium prices have not since electric vehicle production in China has fallen to a standstill while the supply of lithium continues to grow with mines being planned to open this year.

Following the rally, LTHM is now an expensive company and, while its management has been very effective at promoting growth, is likely headed for a secular slowdown due to stalled vehicle production. Even if EV production turns back online, it seems that the world is headed for a global recession which will undoubtedly lower demand for new vehicles and expensive batteries.

Supply Chain Struggles

Livent crashed 15% two weeks ago when the company announced that it expected lithium prices to remain depressed through 2020. Looking at Trading Economics data, we can see that prices have generally declined by about 40% over the past year. This makes Lithium roughly 75% below its 2018 peak. Lithium prices have been down due to growing production from Livent and its competitors and lower-than-expected production from automakers like Tesla.

As discussed in my last article, about half of the company's revenue comes from battery sales and the other for medical, industrial, and scientific purposes. That said, the price impact of the slowdown in EV production is likely to bring prices down across the board.

Officially, Tesla's production in its Shanghai factory has officially resumed following a few weeks

ChartData by YCharts

ChartData by YCharts

ChartData by YCharts

ChartData by YCharts

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This article was written by

Harrison Schwartz profile picture
Harrison is a financial analyst who has been writing on Seeking Alpha since 2018 and has closely followed the market for over a decade. He has professional experience in the private equity, real estate, and economic research industry. Harrison also has an academic background in financial econometrics, economic forecasting, and global monetary economics.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in LTHM over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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