SQM - SQM raised at BofA as lithium downcycle seems priced in

2023-04-10 11:49:00 ET

Sociedad Química y Minera de Chile ( NYSE: SQM ) +1.1% in Monday's trading as Bank of America upgraded the stock to Neutral from Sell with an $85 price target, with a downcycle in lithium prices given the expectation of new supply coming to the market that should lead to weaker earnings for SQM, but the stock's 30% selloff since November has priced in those effects.

Chinese prices have moved from $80K/ton to $34K/ton since the November peak, and while restocking could lead to a pick-up in prices towards H2 2023, this coincides with the commissioning of new mines, which should prevent a major rally, BofA analyst Isabella Simonato wrote, noting lithium is "not a resource constrained commodity, meaning there is no shortage in lithium deposits."

SQM ( SQM ) will "take some time" to capture the new price level given existing contracts, but we should see a full impact in 2024, Simonato said, adding strong cash flow generation also supports SQM's stock price.

SQM's ( SQM ) considerable investments to increase its lithium capacity may start paying off in 2024, SM Investor writes in an analysis published recently on Seeking Alpha .

For further details see: