Oppenheimer cuts Albemarle target to $123, keeps outperform

On Friday, Oppenheimer adjusted its outlook on Albemarle Corporation (NYSE:ALB), a global developer of lithium and other chemical solutions. The firm's analyst, Colin W. Rusch, reduced the price target to $123 from the previous $170 while maintaining an Outperform rating on the stock. According to InvestingPro data, analyst targets for ALB currently range from $73 to $225, with the stock trading at $81.06. InvestingPro analysis indicates the stock is currently fairly valued based on its proprietary Fair Value model.

Rusch's revision reflects concerns over increased spot market risk, yet he acknowledged the company's efforts to foster resilience within its operations. Despite these risks and the current sluggish spot prices, the analyst remains optimistic about Albemarle's future, expecting the company to generate positive free cash flow (FCF) in 2025. This would mark a significant turnaround from the current situation, as InvestingPro data shows negative free cash flow of -$983.72 million in the last twelve months. The company maintains strong liquidity with a current ratio of 1.95, indicating sufficient assets to cover short-term obligations. This outlook is supported by a pause in lithium industry capacity expansion and consistent electric vehicle (EV) sales growth in China, with stable or rising sales in the US and EU markets.

The anticipation of a U-shaped recovery in lithium prices further bolsters confidence in Albemarle's prospects. Rusch highlighted Albemarle's improved gross margins (GM) in the fourth quarter of 2024, attributing this to the company's successful cost reduction strategies and a modest increase in spot prices, which were over 10% higher than the lows experienced in the third quarter of 2024. However, InvestingPro data reveals current gross margins remain challenged at 1.57%, with revenue declining 44.08% year-over-year. For deeper insights into ALB's financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

The revised price target of $123, down from $170, represents a more cautious stance on the pricing outlook for 2025 and 2026. Despite the reduction in the price target, Rusch's Outperform rating suggests a belief that Albemarle's stock will still perform better than the overall market or its sector average in the foreseeable future.

In other recent news, Albemarle Corporation has been the subject of several analyst revisions. Mizuho (NYSE:MFG) Securities lowered its price target for the lithium producer from $105 to $90, maintaining a neutral rating, despite the company's adjusted EBITDA for the December quarter of 2024 surpassing estimates. The firm's new estimates place Albemarle's expected 2025 EBITDA at $1.13 billion, slightly below the Bloomberg consensus.

Evercore ISI downgraded Albemarle stock from Outperform to In Line, setting a new price target of $88. The analyst cites a cautious outlook on the lithium market and anticipates a possible third consecutive year of EBITDA contraction in 2025.

Meanwhile, Truist Securities initiated coverage of Albemarle with a Hold rating and a price target of $96. The firm recognizes Albemarle's strong position in the lithium market but expressed concerns about potential oversupply issues that could pressure lithium prices.

Baird raised its price target for Albemarle to $103 while maintaining a Neutral rating. The firm noted Albemarle's ongoing cost-saving measures and potential catalysts heading into 2025, but expressed caution due to the current state of pricing and limited visibility into the anticipated uptick in demand for electric vehicles and lithium.

Lastly, Jefferies increased the price target on Albemarle's shares to $130, reiterating a Buy rating. The firm highlighted signs of structural change within the company, including a significant reduction in net technology royalties anticipated by 2025 and royalty neutrality by 2030.

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