A range of lithium stocks are trending lower today as investors digest some key analyst ratings. Shares of Albermarle (NYSE:ALB) and Livent (NYSE:LTHM) declined around 2% each as of 2 p.m. EST on key analyst downgrades from Piper Sandler.
Albermarle’s price target cut was particularly steep, with Piper Sandler cutting its one-year price target to $100 from $155, reducing its rating from “overweight” to “neutral.” Livent also saw its target price cut from $33 to $19, with its rating also lowered to “neutral.”
Piper Sandler analyst Charles Neivert appears to be taking the view that lower electric vehicle (EV) demand moving forward may affect the lithium industry’s supply and demand dynamics over the medium term. Additionally, various downstream issues, including a faster rate of lithium supply growth and issues within OEMs, could lead to a lithium market that is over-supplied. That’s markedly different from the analyst’s previous view that the lithium market could be under-supplied, as recently as his note six months ago.
Let’s dive into what investors may want to make of these analyst downgrades and whether these stocks deserve today’s selloff.
Lithium Stocks Sink on Bearish Analyst Notes
First of all, it’s worth noting that Piper Sandler isn’t the only shop in town, and the views of other analysts diverge from that of Neivert. In fact, analysts at Deutsche Bank upgraded their stance on Livent to “buy” from “hold,” seeing the stock as one with much greater upside potential given its already steep decline of 30% in short order.
Additionally, it’s unclear whether any sort of slowdown in EV demand will lead to the kind of supply/demand rebalancing Piper Sandler believes will take place, given that it appears a recession-like scenario is being factored into this analysis, and we really have no idea how long or deep a recession (if it materializes) will be. Thus, as with any analyst rating, investors need to take this research at face value and assess it using their own sets of assumptions.
I do think now is not the time to grow increasingly bullish on any particular asset, and I agree that we’re likely to see a period of economic weakness on the horizon. That said, commodities stocks such as lithium miners may prove to be more defensive or safe haven assets than analysts are giving the sector credit for. Thus, I’m of the view that Deutsche Bank may be closer to the mark when it comes to the overvalued vs. undervalued discussion around these companies right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
