What happened

Although the dog days of summer took a bite out of Albemarle (ALB 4.38%) in the first week of August -- with shares dropping about 2.6% -- the lithium stock is biting back this week. Thanks to positive commentary from Wall Street and momentum building with the climate bill, Albemarle's stock is on track to recover the loss it suffered last week and bound even higher.

As of 12:36 p.m. ET today, shares of Albemarle are up 17% since the market's close last Friday.

So what

Shares began the week on an auspicious note thanks to Deutsche Bank analyst David Begleiter raising the price target to $270 from $255 on Monday morning. According to The Fly, Begleiter predicated the price target hike on the "impressive" second-quarter 2022 earnings results the company reported on Aug. 3. The analyst's higher price target likely charged up investors' enthusiasm since it suggested notably more upside to the stock than the $196 price target that Credit Suisse had provided the day after Albermarle reported earnings.

Besides analysts' opinions, the major catalyst helping to catapult shares higher this week is the growing confidence that the Inflation Reduction Act will make it to President Joe Biden's desk. With $369 billion in funding to improve the nation's energy security and address climate change, many pundits believe the legislation will be a boon for renewable energy-oriented stocks like Albemarle, whose production of lithium is critical for batteries used in electric vehicles and energy storage -- two applications addressed specifically in the Inflation Reduction Act.

Now what

Investors are right to believe that the Inflation Reduction Act will greatly benefit Albemarle, but prospective investors should recognize that there's a lot of growth baked into the stock price at this point. Shares are trading at 123 times trailing earnings, a steep premium to their five-year average P/E of 56. Fortunately for investors, there are other ways to gain exposure to lithium.