BofA Raises Price Targets For Lithium Producers

The demand for lithium products is inflecting, with accelerating demand for electric vehicles as governments in Europe and Asia inject stimulus to boost vehicle penetration and adoption, according to BofA Securities.

The Chemicals Analyst: Steve Byrne maintained Underperform ratings for Albemarle Corporation ALB and Livent Corp LTHM, while raising the price targets from $78 to $95 and from $7 to $10, respectively.

The Chemicals Thesis: While global EV sales and industrial production have accelerated meaningfully, “the subsequent lithium pull is being met by inventory balances following years of overproduction,” Byrne said.

“However, we see the supply situation easing significantly in the 2023-2025 timeframe as ongoing expansions commission and better economics (read price) bring idled mines back into service. We believe idled hard rock mines and new brownfield capacity could be online in 12-18 months, and new downstream conversion capacity can be on stream in 12 months at modest capex levels,” he wrote in a note.

Shares of Albemarle and Livent have appreciated by more than 80% year to date, with only some of this outperformance warranted by the improving landscape.

“However, we do see reason to increase our estimates for ALB and LTHM given the tighter backdrop,” Byrne said.

He raised the 2021 earnings estimates for the companies from $4.10 per share to $4.30 per share and from 15 cents per share to 25 cents per share, respectively.