SQM - Albemarle: It's Time To Look At Lithium
2024-02-05 15:00:59 ET
Summary
- Albemarle Corporation's stock has dropped significantly due to falling lithium prices and subdued EV battery demand.
- The company's long-term prospects remain bright.
- While Albemarle's stock price has suffered and provides a seemingly good risk/reward situation, I remain skeptical about the prevailing optimism on lithium.
As the S&P500 is at its all-time high, I've started to look at commodity stocks that are at depressed price levels. Enter: Albemarle Corporation (ALB). This leading American lithium mining company has been pummeled in the past year as lithium prices have fallen mostly due to subdued EV battery demand in a harsh macro environment. The slowdown in demand has sparked fears about a wider gap between supply and demand as the mining companies continue to increase production to meet the increasing secular demand.
In August of 2022, Albemarle's stock reached an all-time high at $325 but has now dropped to only $116. A word of caution: Commodity markets are highly volatile and investing in them requires a stomach for fluctuations. However, the volatility can also offer great returns if executed properly. The majority of Albemarle's business is from lithium, and the stock price is highly correlated with lithium prices, so that will be the main point of this article. I issue a Hold rating for this company. If the stock were to drop another 30% or more, or the supply & demand picture turns into a more favorable one, prospective investors should be facing a compelling risk/reward situation....
Albemarle: It's Time To Look At Lithium