Shares of Albemarle (ALB 1.65%) slumped more than 50% at one point in trading in 2023 before regaining some ground in the last couple of months or so. The lithium stock still ended 2023 down 33.4%, according to data provided by S&P Global Market Intelligence.
For this, you can blame a meltdown in lithium prices. Albemarle, however, is still on solid footing, and its stock price could rebound this year as investors avail this golden opportunity to buy a growth stock on the cheap.
Albemarle's sales continue to rise despite low lithium prices
Lithium carbonate prices plunged 80% in 2023, according to data from Trading Economics, as global demand from the electric vehicle (EV) industry dampened amid ample supply of lithium. Most of the EVs today run on lithium-ion batteries, and lithium producers like Albemarle are relying heavily on the EV battery industry for growth.
Things were on a roll for Albemarle until late 2023, with its sales surging 129% and 60% year over year in the first and second quarters, respectively. However, even Albemarle's management couldn't predict where the lithium markets were headed, which is why it downgraded its full-year guidance for sales and adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) in Q1, only to upgrade it again in Q2.
Albemarle also struck some notable deals in the middle of the year. One was an agreement to supply automaker Ford withover 100,000 metric tons of battery-grade lithium hydroxide for EV batteries. It's a five-year supply deal that'll start in 2026.
The other was an agreement with construction and mining equipment giant Caterpillar to supply it with lithium for battery production. Albemarle is also purchasing all-electric mining equipment from Caterpillar.
The third quarter, however, came as a shocker -- Albemarle's sales rose barely 10% year over year as lithium prices fell further, compelling management to downgrade its outlook for the year yet again. Albemarle now expects to report 30% to 35% growth in sales and a flat to 5% lower EBITDA for 2023. Earlier in the year, Albemarle projected 35% to 55% growth in sales for the year.
In between, Albemarle caught the market's attention when it announced plans to acquire Australia's Liontown Resources for nearly $4 billion to expand its footprint in the nation through Liontown's prized lithium project, Kathleen Valley. In October though, Albemarle called off the deal citing "growing complexities," and a month later, it downgraded its outlook for 2023.
Albemarle's stock has a solid chance to recover in 2024
Albemarle's shares have continued to fall further so far in 2024 and are now down a staggering 48% in one year. The stock is now hovering at levels last seen in 2020.
That's a dramatic fall, and it makes little sense when you consider that Albemarle still expects sales to grow by at least 30% in 2023 despite plunging lithium prices. Looking at the bigger picture, its sales and cash flows are also way above 2020 levels, having risen steadily over the past couple of years or so.
Albemarle knows 2024 may not be an easy year to begin with, and is therefore cutting costs and reviewing its projects to preserve cash. Management, however, is still keen to pursue acquisition opportunities and recently hinted that it has a plan in place for "double-digit growth" in 2024. That suggests Albemarle stock may have more upside from here than downside.
