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On Wednesday, Evercore ISI analyst Stephen Richardson downgraded Albemarle Corporation (NYSE:ALB) stock from Outperform to In Line, setting a new price target of $88.00. The company, currently valued at approximately $9.5 billion, has seen its stock decline nearly 23% over the past year. According to InvestingPro data, five analysts have recently revised their earnings estimates downward, with targets ranging from $73 to $225 per share. Richardson’s assessment suggests a cautious outlook on the lithium market, noting an absence of signs for a price recovery in the near term. The analyst’s projections indicate that Albemarle’s EBITDA may fall short of consensus estimates, which could lead to a third consecutive year of EBITDA contraction in 2025. Recent InvestingPro data shows the company is currently unprofitable, with a negative EBITDA of $935 million in the last twelve months and an expected revenue decline of 43% for the current year.
According to Richardson, decisions regarding activity curtailment at joint venture projects could potentially result in reduced lithium volumes for Albemarle in 2025. Moreover, lithium forward curves imply that average selling prices (ASPs) will decrease year over year, particularly as the prices will not benefit from the first quarter of 2024’s ASP of approximately $19/kg throughout the full year.
Albemarle’s leverage ratio headroom for the year was secured through covenant amendments in October. However, concerns arise for 2026 as the company’s capital expenditures and dividend outspend have raised questions about financial sustainability if lithium prices remain stagnant. Despite these challenges, InvestingPro analysis reveals that Albemarle has maintained dividend payments for 31 consecutive years, with a current yield of about 2%. The company’s financial health shows some resilience with a current ratio of 2.44, indicating sufficient liquid assets to meet short-term obligations. Although Albemarle maintains investment-grade status and has several strategic options available, such as the potential monetization of Ketjen, the uncertainty surrounding these moves is expected to impact the stock in the short term.
Richardson further elaborated that without further reductions in maintenance capital expenditures, lithium prices would need to increase by more than 30% to $13-14/kg to organically fund Albemarle’s program. The analyst highlighted that lithium volumes have not decreased as much as anticipated in the current downturn, indicating a lower marginal cost of supply. The presence of new market entrants with significant resources suggests that the cost curve could remain under pressure, irrespective of demand growth, which is expected to continue globally.
Despite these challenges, Richardson acknowledges Albemarle’s important role in the electric vehicle (EV) supply chain and the inevitable transition to EVs. However, he anticipates that probable EV policy adjustments could diminish the likelihood of demand recovery during 2025. The revised 12-month price target of $88 reflects a multiple of 9.5 times the projected 2026 EBITDA of $1.4 billion at $15/kg. Based on comprehensive Fair Value analysis from InvestingPro, Albemarle appears slightly undervalued at current levels. Investors seeking deeper insights can access the full Pro Research Report, which provides detailed analysis of Albemarle’s financial health, market position, and growth prospects, along with 10 additional ProTips not mentioned in this article.
In other recent news, Albemarle Corporation has been the subject of multiple analyst reports. Truist Securities initiated coverage of the lithium producer with a Hold rating and a price target of $96, emphasizing Albemarle’s strong position in the lithium market. However, Truist also expressed concerns about potential oversupply issues that could affect lithium prices and Albemarle’s short-term cash flows.
Baird Financial Services maintained a Neutral rating on Albemarle’s stock, raising its price target from $79 to $103. The firm noted Albemarle’s cost-saving measures and recent supply developments as potential positive catalysts, but expressed caution due to current pricing conditions and anticipated demand for electric vehicles and lithium.
Jefferies updated its outlook on Albemarle, increasing its price target from $120 to $130 while reiterating a Buy rating. The firm highlighted the company’s significant reduction in net technology royalties anticipated by 2025 and margin improvement of more than 300 basis points since 2022.
Berenberg raised its price target on Albemarle to $102 from $81 while maintaining a Hold rating. The firm attributed the positive adjustment to significant changes in Albemarle’s business model, including substantial cost savings and a new strategy to directly sell spodumene into the market.
Lastly, Albemarle saw a 6.2% gain in response to China’s shift towards more accommodating monetary and fiscal policies, underscoring the potential impact of these changes on companies with business interests in the region.
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