What happened
Lithium stock Albemarle (ALB +6.93%) sank this week, losing 12.7% through the week as of 12:30 p.m. ET Friday, according to data from S&P Global Market Intelligence. There was more to the drop in Albemarle shares than just the broader market weakness.
So what
Albemarle runs three businesses but is a prime play on lithium, the metal that goes into batteries that are powering electric vehicles (EV) worldwide. It might, therefore, come as a surprise when an analyst downgrades a leading lithium stock even as global EV sales continue to soar. That's what Goldman Sachs analyst Robert Koort just did.
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On Dec. 15, Koort downgraded Albemarle stock's rating to sell, citing high valuation. Albemarle shares had shot up nearly 22% to 52-week highs in the month of November alone. The analyst sees strong demand for lithium backed by EVs, but expects a rise in supply to ease the ongoing crunch and moderate current high-growth conditions for lithium players like Albemarle. That, Koort believes, could weigh on investor sentiment.
Koort still raised the price target on Albemarle to $205 a share from $199 per share. The stock, however, is still trading well above the analyst's price target, hovering around $229 apiece as of this writing even after this week's decline so far.
Now what
Lithium prices have jumped this year and are sitting at record highs right now, so don't be surprised if some analysts turn cautious about lithium stocks. Yet demand for EVs is booming, and I don't quite see the lithium markets cooling down anytime soon.
In fact, S&P Global Market Intelligence expects demand for lithium carbonate to rise nearly 28% in 2022 from its projected 2021 level, and that could mean firm lithium prices as supply remains short. So even if Albemarle seems overvalued after its dizzying rally this year, I wouldn't bet against the stock, and would hold on to my shares if I were invested, as I see Albemarle as one of the top lithium stocks to play the EV boom.
