Livent Stock an EV Lithium Play to Consider on Price Weakness
Dips in LTHM Stock’s Price Present an Opportunity
The cost of raw materials for electric vehicles (EVs) has risen, given the sanctions placed on Russian metals and the continued supply chain disruptions worldwide. The cost and supply issues have had a negative impact on EV companies, as far as production and margins go.
EV stocks have declined, but I view the lower prices as an opportunity, considering that the industry’s bullish tailwinds remain intact.
One EV company whose share price has recently fallen is Livent Corp (NYSE:LTHM), a key supplier of lithium for EV batteries. Livent stock is down by 33% from its recent high of $34.61, which was set in May.
For long-term investors, LTHM stock’s correction could be viewed as an opportunity.
For a company like Livent Corp, the best is likely yet to come. The EV market has been accelerating around the world, and the demand for lithium will only rise.
China and Europe are currently at the forefront of the EV buildup. Both countries provide significant incentives for people to buy EVs. The U.S. is behind China and Europe in that respect, but a push by the federal government and automakers—both legacy automakers and pure-play EV companies—are expected to drive up the demand for EVs in the years and decades ahead.
According to one study, the global lithium market was around 280 kilotons in 2020, and it’s estimated to expand at a compound annual growth rate (CAGR) of 10% from 2021 to 2026. (Source: “Lithium Market – Growth, Trends, Covid-19 Impact, and Forecasts (2021 – 2026),” Mordor Intelligence, last accessed June 27, 2022.)
Livent Stock’s Technical Outlook Is Bullish
Shares of Livent Corp traded as low as $3.95 during the COVID-19 pandemic sell-off in March 2020. I highly doubt we’ll see LTHM stock’s price that low again, but that doesn’t mean the opportunity to make gains is lost. My view is that Livent stock is likely at the beginning of a long-term upward move.
The below longer-term chart shows shares of Livent Corp breaking out from an ascending triangle in August 2021 after the emergence of a golden cross pattern in September 2020.
The break failed to hold in November 2021 due to bearish market sentiment and the aforementioned cost and supply chain issues. After a short correction, LTHM stock has been rallying.
Chart courtesy of StockCharts.com
The trading in the immediate term will likely provide more opportunities to find Livent stock at low prices. Longer-term, there are prospects for far bigger gains from shares of Livent Corp.
The following one-year chart shows LTHM stock looking to trend higher after holding its trendline support on several occasions.
Chart courtesy of StockCharts.com
A takeout of Livent stock’s 200-day moving average at $25.37 could see a move to its 50-day moving average at $25.90. Above this level is resistance levels of $27.00 and $30.00, followed by the stock’s recent high.
The downside risk with LTHM stock is around $20.00 to $21.00, which provides a decent risk/reward ratio.
Livent stock is a favorite of institutional investors and insiders.
As of this writing, 525 institutions hold 91.7% of the outstanding shares of Livent Corp. And if you believe that company insiders know the business the best, consider that, over the last six months, insiders bought 98,268 shares of LTHM stock. (Source: “Livent Corporation (LTHM),” Yahoo! Finance, last accessed June 27, 2022.)
This EV stock’s story is bullish and will likely get better, especially if the high gas prices stick around for a while. Livent Corp is a great play on the lithium EV battery market, so investors might want to consider shares on price dips.