What happened
After falling consistently in recent months, Albemarle (ALB 2.85%) stock reversed course this week and was trading up 10% as of 10 a.m. ET Friday, according to data provided by S&P Global Market Intelligence.
With the lithium stock plunging 37% since the beginning of February through last week, investors sensed a great opportunity to scoop up shares of the world's largest lithium miner. Bumper numbers from Albemarle and lithium prices rebounding after a steep recent fall proved to be the perfect catalysts for investors to hit the buy button.
So what
Lithium carbonate prices hit 19-month lows on April 24 on oversupply concerns and fears of declining electric vehicle (EV) sales. Sales of new energy vehicles (NEV) in China, in particular, slowed down considerably in the first quarter after the government withdrew cash subsidies. With a price war also ensuing in the EV industry thanks to Tesla's aggressive price cuts, customers postponed or canceled purchases in anticipation of even lower prices.
Have lithium prices bottomed? That's not a far-fetched idea given how prices have more than halved from their all-time highs of December. With industry experts foreseeing renewed demand for EVs in the second quarter, prices of battery-grade lithium carbonate in China continued to climb for the 10th consecutive day on May 12 according to CnEVPost.
Albemarle stock's rise this week, therefore, should come as no surprise. Albemarle may have cut its outlook for 2023 last week, but investors hope the company will eventually beat its estimates as lithium prices stabilize.
For now, Albemarle expects 35% to 55% growth in sales this year. That's still solid growth, and with lithium prices also rebounding this week, several analysts upgraded their ratings on Albemarle stock. Analysts at Bank of America, for example, upgraded the lithium stock's price target to $200 per share, while Keybanc analysts gave Albemarle a price target of $270 a share.
Now what
Albemarle is growing steadily and wants to make the most of the EV boom. BY 2030, Albemarle believes it could nearly triple its lithium conversion capacity, or the capacity to convert lithium carbonate into battery-grade compounds. The long-term story for the lithium miner hasn't changed, which is why it makes for such a tempting stock to buy now.
