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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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Although I mostly focus on value investing, there will also be plenty of high-yield dividend stocks being analysed on the channel, especially if I believe that there is value in there.
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DISCLAIMER: I am not a financial advisor and nothing on this channel should qualify as investing advice. All information is provided for your education or entertainment. It is not intended to be investment advice. This information is general in nature and has not taken into account your personal financial position or objectives. Seek a duly licensed professional for investment advice.
DISCLAIMER 2: The links above include affiliate commission or referrals. I'm part of an affiliate network and I receive compensation from partner websites. The video is accurate as of the posting date but may not be accurate in the future.
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
#advert. eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.
Join this channel to support me and get access to perks:
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.
Other videos:
Don't forget to like and subscribe if you appreciate what I do!
On my channel, you will find a wide variety of stock analyses - from gold miners such as Barrick Gold (NYSE: GOLD) and Newmont Mining (NYSE: NEM) to tech stocks like Nokia (NYSE: NOK), Alphabet (NYSE: GOOG/GOOGL), Intel (NYSE: INTC) and even healthcare REITs like Medical Properties Trust (NYSE: MPW) and Omega Healthcare Investors (NYSE: OHI).
Although I mostly focus on value investing, there will also be plenty of high-yield dividend stocks being analysed on the channel, especially if I believe that there is value in there.
Song: ♪ Marshmallow (Prod. by Lukrembo)
DISCLAIMER: I am not a financial advisor and nothing on this channel should qualify as investing advice. All information is provided for your education or entertainment. It is not intended to be investment advice. This information is general in nature and has not taken into account your personal financial position or objectives. Seek a duly licensed professional for investment advice.
DISCLAIMER 2: The links above include affiliate commission or referrals. I'm part of an affiliate network and I receive compensation from partner websites. The video is accurate as of the posting date but may not be accurate in the future.
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
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