Home Market News Albemarle Hits Near 52-Week Low After BofA Downgrade and JV Deal

Albemarle Hits Near 52-Week Low After BofA Downgrade and JV Deal

0
Albemarle Hits Near 52-Week Low After BofA Downgrade and JV Deal

Albemarle (NYSE:ALB) is making waves in Wednesday’s trading as it takes the top spot as the biggest loser on the S&P 500, with a significant drop of -9.6%. This decline comes after Bank of America downgraded the stock to Underperform from Neutral, lowering its price target from $212M to $161. According to BofA analyst Steve Byrne, the downgrade is due to the ongoing oversupply of lithium in the market.

Byrne anticipates that the oversupply of lithium will continue until 2025, resulting in a period of earnings and margin pressure across the value chain. In this regard, Albemarle (ALB) is likely to face challenges as it pursues growth and is expected to burn a significant amount of cash, which could impact its valuations.

In light of the earnings revisions and the free cash flow headwinds, Byrne believes that Albemarle (ALB) will need to take on $2 billion in debt financing over the next two years to address a potential capex shortfall. This could further weigh on the company’s earnings profile.

In addition to the downgrade, Albemarle (ALB) has also closed a restructuring of its joint venture with Australian lithium producer Mineral Resources (OTCPK:MALRF) (OTCPK:MALRY), in which it has agreed to pay up to $400 million.

Another casualty of the lithium market downturn is SQM (NYSE:SQM), which has suffered a -6.8% drop in Wednesday’s trading. BofA has also downgraded SQM to Underperform from its previous rating, with a new price target of $59, down from $69. This downgrade follows 20%-50% cuts in lithium price assumptions from the BofA Global Commodities team for the period leading up to 2025.