When you find growth stocks that have been hammered despite their long-term investing thesis still being firmly in place, it's time to jump right in. Although 2023 was a rebound year for growth stocks, some failed to join the recovery as industry-specific concerns clobbered their businesses. As a result, opportunities abound.
For example, growth hasn't come easy for Albemarle (ALB 1.65%) in recent quarters as lithium prices crashed over the past year or so. Albemarle stock ended 2023 down 33% after plunging more than 50% at one point during the last quarter of the year. Thanks to last year's fall, the growth stock is now down nearly 55% from its all-time highs.
I believe the market's fears about Albemarle are overdone and it's time for investors to get greedy. With shares hovering at levels last seen in 2021, Albemarle is one growth stock you'd want to buy hand over fist now for 2024.
Double-digit sales growth, catalysts in place
For a stock that fell so rapidly in one year, you'd expect growth at the company to have stalled. That's far from the case for Albemarle.
To be sure, Albemarle recently cut its sales outlook for 2023, so the market's fears aren't entirely unwarranted. What appears unwarranted, though, is the market's strong reaction and the pace at which the stock fell.
Albemarle still foresees 30% to 35% growth in sales for 2023. That's unarguably solid growth in a market that saw lithium carbonate prices plunge 80% in 2023 alone, according to data from Trading Economics.
The thing is, lithium is Albemarle's primary product, and the bulk of the company's sales volumes are sold under long-term contracts. That means volumes can still drive Albemarle's top line higher even if prices plunge. That's precisely what's happening now, and Albemarle's volume growth should continue beyond 2024. Driven by capacity expansions, Albemarle expects its sales volumes to grow at a compound annual rate of 20% to 30% between now and 2027.
Put another way, Albemarle expects to triple volumes by 2027. While it's hard to predict commodity prices, the demand for lithium is only expected to rise in the long term, in which case Albemarle could be setting itself up for big things to come. The company projects global demand for lithium to 5x by 2030, driven by electric vehicle (EV) sales. EVs are the largest driver of demand for lithium as most EVs run on lithium-ion batteries.
Image source: Albemarle investor presentation.
To ensure it remains at the forefront of the EV and lithium boom, Albemarle is also looking for opportunities to acquire. It was planning to acquire Australia's Liontown Resources for around $4 billion in 2023 when complexities, including an activist investor's intervention, forced Albemarle to call off the deal. During Albemarle's third-quarter earnings conference call, management stated that while it will continue to pursue acquisition opportunities, the scale of those opportunities isn't as big in the current environment.
That may sound detrimental, but it also means Albemarle wants to use its cash judiciously during these challenging times. In fact, CEO Kent Masters even hinted recently that Albemarle could cut its capital spending in 2024 to adapt to the changing market conditions, but it'll ensure its moves don't impact any growth project that's already under development. For perspective, Albemarle expects to spend a whopping $1.9 billion to $2.1 billion in capital expenditure in 2023.
A rare opportunity to buy a solid growth stock
The long-term prospects for lithium look rock-solid, and as the largest lithium producer in the world, Albemarle has already positioned itself firmly to benefit from the boom. The company is expanding capacity aggressively, has a strong balance sheet, and also pays a regular dividend. The best part, though, is that Albemarle stock is cheap now based on most valuation metrics.
ALB PE Ratio data by YCharts
It's rare to find a growth stock that also doubles as a value stock -- that's the kind of rare opportunity Albemarle is offering investors right now. And when the company is also a leader in an industry that could grow exponentially in the years to come, it becomes a growth stock you'd want to buy hand over fist right away for 2024 and beyond.
