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Why Albemarle Stock's Drop This Week Is an Opportunity

By Neha Chamaria - May 13, 2022 at 4:41PM

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The lithium stock's fall makes no sense given how strong its business fundamentals are.

What happened

Albemarle (ALB 3.94%) shares were caught in the stock market rout this week, with the lithium stock losing 6.3% in the week through 2 p.m. Friday ET, according to data provided by S&P Global Market Intelligence. That's despite Albemarle receiving multiple analyst upgrades in the past few days following a solid set of first-quarter numbers.

So what

Albemarle got off to a solid start this month with an impressive first-quarter earnings report released on May 4. The lithium stock shot up post-earnings-per-share, and I'd have expected the enthusiasm to carry forward this week had the markets not slumped.

Albemarle, after all, saw its Q1 revenue and net income rise a solid 36% and 165% year over year, respectively, and management also upped its outlook for the full year.

A person charging an electric car.

Image source: Getty Images.

Investors were pleased, and so were analysts. From May 5 through this week, analysts from at least nine research firms upped their price targets on Albemarle stock, with Oppenheimer analyst Colin Rusch turning out to be most bullish with a price target as high as $368 per share. The analyst previously had a price target of $307 per share on Albemarle. The stock is hovering around $228 per share, as of this writing.

Now what

I've been bullish about Albemarle for a long time now, and the company's latest earnings report reflected, yet again, the kind of growth potential in the lithium market. Demand for lithium that's a key component for batteries in electric vehicles has shot up amid the boom in EVs, with the Russia-Ukraine conflict only helping shift focus from fossil fuels to clean energy. Albemarle is making the most of the red-hot EV market as one of the world's largest lithium mining companies.

Any other week, I'd have expected Albemarle stock to rally given its solid showing in the first quarter. The markets haven't been kind this week, though, with the unnerving volatility taking in stocks across sectors. Lithium carbonate prices also cooled off a bit this week after China hinted that it'll increase production. The two factors combined to put pressure on Albemarle stock. Yet, savvy investors seem to be already finding value in the lithium stock – it jumped more than 8% at one point in trading on Friday.

With Albemarle projecting its average realized price for lithium to double in 2022 versus last year, I expect the company to continue to deliver strong numbers quarter after quarter. As long as it does that, and as long as demand for EVs grows, investor interest in Albemarle stock should remain high.

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Albemarle Corporation
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