BofA downgraded Albermarle Although a majority anticipates the likelyhood of lithium demand growth outpacing supply by a significant margin by the end of this decade, a BofA believe otherwise. How come...
Lithium producer Albemarle (ALB) was the worst-performing stock in the S&P 500 on Wednesday as shares fell 9.8% after Bank of America downgraded the stock and slashed its price target, arguing that the outlook for the metal used in batteries is “challenged.”
BofA cut its rating of Albemarle to "underperform" from "neutral," warning that the lithium market will move from adequately supplied to oversupplied in 2024 and 2025. The bank also reduced the price target to $161 from $212.
In addition, BofA lowered Albemarle’s earnings forecast because of a change in price outlook for lithium, which it now sees declining 20% to 50% from this year through 2025. The analysts expect earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2024 to be $1.816 billion, down from the previous estimate of $3.595 billion. They project EBITDA in 2025 to be $2.873 billion versus the earlier $4.472 billion.
The bank added that with falling earnings and associated cash flow headwinds, it anticipates Albemarle will need to take on $2 billion in debt obligations over the next two years to cover a capital expenditures funding shortfall. It noted that would drag down profits too.
Shares of Albemarle plunged to their lowest level in two and a half years following the news.