Arcadium Lithium Stock Analysis: Arcadium to TRIPLE by 2027?! The Best Lithium Stock for EVs? $ALTM

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Following the merger of Livent and Allkem, Arcadium (NYSE: ALTM) is set to become one of the biggest lithium companies on the planet.

They now have operations everywhere but in Africa, and after combining, they became a diversified lithium plus chemical processing company. You can see on the screen how they kind of complete each other’s business model, which can result in synergies, as you are about to see in a bit.

What’s very interesting is that based on the current projects that have been in development for several years, Arcadium should produce around 250 thousand tonnes per year by 2027. So, pretty much tripling the production in 3 years, making them the third biggest player in the market. That by itself can offer a lot of potential, even if lithium remains around the current level in the long-term, but more on this in the valuation.

Before the merger, Allkem - the one that was focusing more on producing among the two - had a production cost of something like $4 to $4.5 thousand per tonne, so the margin of safety is very good.

Now, the potential of lithium thanks to EV batteries and storage is very impressive, with an expected CAGR from 10% or 15% to even more than 20% over the following decade depending on the adoption of electric vehicles. Albemarle has recently cut its 2030 demand outlook due to the slower adoption, but there is still a lot of potential because even if we manage to triple the lithium production from 2019, that would offset like half of the expected demand.

Allkem and Toyota had a few projects together, so you can see that there is interest in lithium especially from car manufacturers. You can see on the screen some recent investments just in that region. It’s mostly big mining or car companies, be it alone or indirectly through a common project like Allkem’s.

At the current price of lithium, they expect to make around $400 million in EBITDA, which last year came to around $330 million in net income. But, if lithium jumps to $25 they could make even a billion in EBITDA, and potentially over let’s say $800 million in net income. That would put the current price to earnings ratio at around 15 to 20, which is fair, but in the second case, it would be something like 7, which is unlikely to remain like that. If that happens, given the interest in the company, this can easily double.

They see capital spending of around half a billion to $750 million this year, but only $100 to $125 million is in maintenance, so they don’t need a lot of money to run the business, which is very good.

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0:00 Arcadium Lithium (NYSE: ALTM) Stock Review
1:52 Arcadium Lithium (NYSE: ALTM) Financial Analysis
6:53 Arcadium Lithium (NYSE: ALTM) Stock Valuation, Target, Conclusions

[Investing_With_Andrew]

In this Arcadium Lithium (NYSE: ALTM) stock analysis, we go through the recent Livent + Allkem merger and discuss Arcadium's financials, risk-reward and more before going through a valuation for its ALTM stock and sharing my entry price target and conclusions.

[ravigowda]

Andrew - Great minds think alike! I've been working on ALTM for the last few days and am about to buy, so your video was timely. High quality video as well. As a suggestion, you may want to spend a bit longer on your slides as there's lot of data that you could go through. This will increase the length of video but I think this would be a positive step. Keeping producing these great videos and thank you.

[bcdinvestmentgroupinc]

Thank you. This video was very helpful.

In my opinion, when you did the negative scenario for the valuation, you could have provided more detail, like you did with the neutral and best scenario (for example, the 'fair' stock price, net income, etc...).
Also, do you believe that the price could collapse even more, from the current $4.5 share price, to $2/share?

[tonikang]

I own quite a bit of this stock. This stock has been nothing but a joke. Don't buy this stock. This is the stock that fundamentals don't matter. Only lithium supply and demand matters.