After a rough patch for lithium-mining stocks, Wall Street sees things getting better, prompting analysts to unleash a series of stock upgrades in recent weeks. Another one came on Monday.
Baird analyst Ben Kallo upgraded shares of
Albemarle
(ticker: ALB) to Buy from Hold. His price target went to $288 from $222 a share, while the stock was trading at $200 on Monday morning.
Albemarle stock “is down about 41% from its highs less than a year ago,” wrote Kallo in his upgrade report. “Clarity on the impact of pricing, a reset of guidance, and Albemarle’s vertically integrated system position it as a leader for the near and longer term….we see upside to [earnings] estimates from any increase in lithium pricing.”
Demand for lithium, which is critical to making the batteries that power electric vehicles, isn’t slowing down, he said.
Falling prices for lithium have wreaked havoc on Albemarle stock and shares of its peers. Benchmark lithium prices are down about 54% over the past three month, while Albemarle stock has fallen about 28%.
Shares of lithium peers
Livent
(LTHM) and
SQM
(SQM) are down 7% and 24%, respectively. Shares of start-up miners
Piedmont Lithium
(PLL) and
Lithium Americas
(LAC) are down 19% and 14%, respectively. The
S&P 500
is up about 1% over the past 3 months.
Lithium prices are now at about $30,000 a metric ton, after they hit almost $90,000 a ton in November, prompting leading makers of batteries to use their inventories of the metal instead of buying more.
The inventory-reduction process seems to be complete and lithium miners have reset their financial forecasts after the fall. In early May, Albemarle said it expects 2023 sales to fall between $9.8 billion and $11.5 billion, while management had projected $11.3 billion to $12.9 billion in February. Earnings per share are now expected to be between $20.75 and $25.75, down from a range of $26 to $33.
Investors don’t like buying commodity-linked stocks when commodity prices are falling. But they love to buy at the bottom. Now, bottoming prices, changes to financial guidance to recognize the tougher situation, and continued growth in global EV sales have the Street feeling better about lithium stocks.
Albemarle stock has been upgraded to Buy three times in recent weeks. Livent shares have caught four upgrades.
SQM stock has actually caught a few downgrades on concerns about mining regulatory changes in Chile. That country plans to slowly nationalize its lithium mining assets and SQM has a large presence in Chile.
Overall, 68% of analysts covering Albemarle stock rate the shares at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 53%. The average analyst price target is about $262 a share. And 75% of analysts covering Livent shares rate them Buy. The average analyst price target is about $32 a share.
Livent stock was flat in premarket trading Monday at $25.50. Albemarle shares were up 2.2% and S&P 500 and
Dow Jones Industrial Average
futures both rose about 0.4%.
Write to Al Root at allen.root@dowjones.com
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