A deceleration in EV demand combined with a growing supply of lithium products— which go into batteries powering electric cars—has Wall Street nervous.
On Monday, UBS analyst Joshua Spector cut his rating on shares of lithium mining giant
Albemarle
(ticker: ALB) to Hold from Buy. His price target went down about 45%, to $140 from $253 a share.
The cut had
Albemarle
shares down 5% in midday trading at just under $122 apiece, while the
S&P 500
and
Dow Jones Industrial Average
were up 0.2% and 0.1%, respectively.
There has been little relief for Albemarle investors lately. Through midday trading, shares were down about 39% over the past three months.
At the same time, EV sentiment is as bad as ever, after disappointing earnings from
Tesla
(TSLA), slowing EV spending at
Ford Motor
(F) and
General Motors
(GM), as well as weak sales guidance from suppliers such as
ON Semiconductor
(ON), wrote
Citi
automotive analyst Itay Michaeli in a Monday report.
For Albemarle and other lithium miners, the problems translate into weak supply and demand. When battery makers need more lithium than miners can supply, prices rise, which leads to higher earnings and stock prices. When there is more lithium than battery makers need, prices fall, which is bad news for lithium makers.
Lithium prices are down some 70% over the past 12 months. Estimated 2024 per-share earnings for Albemarle have fallen to about $16 from $24, down by about one-third.
Benchmark lithium prices currently sit at roughly $23,000 a metric ton.
“We see a greater risk to lithium volume growth and more downside earnings risk to 2024,” wrote Spector. His 2024 estimate for Albemarle is $9.40 a share, well below the Street average.
Spector isn’t the first to downgrade Albemarle shares. Analysts at Piper Sandler and BofA have also downgraded shares in the past three months. Piper cut the rating to Hold from Buy.
BofA
cut the rating to Sell from Hold.
Overall, about 76% of analysts covering Albemarle stock still rate shares a Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target is about $206 a share.
There are still bulls out there, but lithium prices will need to improve for the stock to see a bump.
Write to Al Root at [email protected]
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