Albemarle Corporation (NYSE:ALB)’s (ALB) stock price performance could be impacted negatively as there’s greater risk to lithium volume growth and more downside earnings risk in 2024, according to UBS analysts.
In an update to clients, they downgraded the world’s biggest lithium producer to ‘Neutral’ from ‘Buy’, while reducing their target price to $140 per share from $253, noting they need more visibility on demand, pricing, and capex to get more constructive as China lithium prices are down about 50% from its June 2023 mini-cycle peak.
"ALB has ~80% of volumes on contracts, with lags and floors, which helps limit downside, but it isn't clear 1) where those floors kick in and 2) if they will hold in a prolonged downturn," the analysts wrote.
Analysts at UBS added that they reduced their electric vehicle (EV) forecasts, with lithium demand growth expected to decline from 30% year over year to 22% in 2024, due to weaker demand expectations in Europe and the US, resulting in lithium over-supply sooner than expected.
The analysts stated, however, that with Albemarle’s stock down 50% since the July peak, its shares could be undervalued if lithium prices move up to more normalized levels by 2025.
Shares of Albemarle fell 6% to $120.55 in midday trading on Monday and have dropped 44% year to date.
Contact Sean at sean@proactiveinvestors.com