Albemarle (ALB) Stock Alert: Why Are Lithium Prices Plunging?

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  • Albemarle (ALB) stock tumbled 9% yesterday after two banks cut their price targets on the lithium producer. 
  • The banks cited low lithium prices as the key reason for their target reductions.
  • However, there are indications that lithium prices could rebound meaningfully over the longer term. 
ALB stock - Albemarle (ALB) Stock Alert: Why Are Lithium Prices Plunging?

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The shares of lithium producer Albemarle (NYSE:ALB) dropped about 9% yesterday to a multi-year low. ALB stock sank after two banks cut their price targets on the shares, citing the sharp decline of lithium prices. Although larger amounts of lithium are being used to power electric vehicle batteries, as global EV sales are increasing meaningfully, excess supplies of the metal have pushed down prices tremendously since late 2022.

However, there are indications that lithium prices will rebound sharply in the long term.

The Price Target Cuts

Investment bank Baird slashed its price target on ALB stock to $127 from $170. The lithium producer is likely to report “weak” second quarter results because lithium prices have “remained at or below the bottom end of [Albemarle] guidance,” the bank stated.

The metal now costs about $12,500 per metric ton, versus roughly $85,000 per metric ton in late 2022. On a positive note, however, Baird reported that it was encouraged by “stronger-than-expected EV deliveries.” The investment bank kept a “buy” rating on the shares.

UBS lowered its price target on ALB stock to $109 from $124. The bank, which also cited lower lithium prices for its move, kept a “neutral” rating on Albemarle stock.

Lithium Prices Could Jump in the Longer Term

Last October, Deutsche Bank predicted that a “modest” shortage of lithium would develop by the end of 2025. And by 2030, the deficit would jump to 768,000 metric tons, the bank predicted.

Sounding very bullish on the outlook for lithium more recently was none other than Exxon Mobil (NYSE:XOM). An executive at the giant oil producer, which is looking to become a major producer of the metal, told Bloomberg last month that  “we know the world urgently needs significantly more lithium than it’s producing today.” And the fact that the firm is looking to get into the lithium business indicates that it expects lithium prices to climb meaningfully in the long term.

On the date of publication, Larry Ramer did not hold (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

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.


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