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Albemarle (NYSE:ALB) is Wednesday’s biggest loser on the S&P 500, -9.6%, as Bank of America downgraded the stock to Underperform from Neutral with a $161 price target, slashed from $212M, saying lithium supplies continue to exceed demand.
BofA analyst Steve Byrne anticipates lithium oversupply will continue into 2025 with “a period of earnings and margin pressure across the value chain,” and Albemarle (ALB) is likely to burn considerable cash in its pursuit of growth, which should weigh on valuations.
Given earnings revisions and associated free cash flow headwinds, Byrne believes Albemarle (ALB) will need to take on $2B in debt financing over the next two years to address a likely capex shortfall, which will further drag on the company’s earnings profile.
Albemarle (ALB) also said it closed a restructuring of its joint venture with Australian lithium producer Mineral Resources (OTCPK:MALRF) (OTCPK:MALRY), in which it agreed to pay as much as $400M.
Also, SQM (NYSE:SQM) -6.8% in Wednesday’s trading as BofA also downgraded the lithium producer to Underperform with a $59 PT, cut from $69, following 20%-50% cuts in lithium price assumptions from the BofA Global Commodities team through 2025.