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Tuesday, Albemarle Corporation (NYSE:ALB) saw its price target lowered by Scotiabank (TSX:BNS) from $75.00 to $65.00, while the firm maintained a Sector Perform rating on the stock. The stock, currently trading at $57.94, has declined nearly 55% over the past year according to InvestingPro data. The adjustment comes amid a reassessment of the lithium market, where current spot prices are hovering around $8,500 per metric ton, suggesting a lower-for-longer price environment than previously anticipated.
Scotiabank’s analysis indicates a need for a downward revision of valuation year estimates for Albemarle. The firm’s revised EBITDA forecast for the year 2026 stands at $1.1 billion, a decrease from the earlier market consensus of $1.3 billion. This reduction reflects the new expectations of average lithium carbonate equivalent (LCE) prices, countering the prior assumption of a $13,000 per metric ton average price next year. InvestingPro data shows the company currently trades at a high EBITDA multiple of 53.9x, with 10 analysts recently revising their earnings expectations downward.
The report further notes that investor confidence may wane as uncertainties regarding mid-cycle lithium pricing emerge, potentially affecting valuation multiples. Despite maintaining a 9x EBITDA multiple for 2026, Scotiabank expresses a bias toward a lower multiple in a mid-cycle market. The firm suggests that lithium EBITDA should trade at a 0x to 1x premium to copper EBITDA over time.
Moreover, the analyst from Scotiabank highlighted several risks that continue to loom over Albemarle. These include balance sheet leverage, potential capital raise risk, and sustained lower pricing. While acknowledging that Albemarle has managed its balance sheet exceptionally well thus far, as evidenced by its healthy current ratio of 2.11 and 31-year dividend increase streak, the firm remains cautious, considering the stock to be fairly valued at present, warranting the decision to maintain the Sector Perform rating. For deeper insights into Albemarle’s financial health and valuation metrics, access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Albemarle Corporation reported its Q1 2025 earnings, revealing an EPS of -$0.18, which exceeded analyst forecasts of -$0.5. However, the company’s revenue fell short of expectations, coming in at $1.1 billion compared to the anticipated $1.18 billion. Despite this revenue miss, Albemarle maintained its full-year outlook for 2025, projecting that lithium demand will more than double by 2030. In a separate development, CFRA downgraded Albemarle’s stock from Sell to Strong Sell, lowering the price target to $29.00 from $37.00. This downgrade was influenced by a 21% drop in first-quarter sales year-over-year, primarily due to a 35% reduction in pricing within the Energy Storage segment. CFRA expressed concerns over Albemarle’s significant market exposure in China, which accounts for approximately 30% of its total sales, amid rising U.S.-China tensions. These recent developments highlight the challenges Albemarle faces with pricing and demand in the lithium market.
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