After a 33.4% decline in the stock price in 2023, lithium miner Albemarle (ALB -1.97%) investors were hopeful that 2024 would bring better performance. However, the stock has continued to slide this year, with a 33.9% decline in the first half of the year, according to data provided by S&P Global Market Intelligence. It's a move as much about a deterioration in sentiment as it is about the decline in the price of lithium carbonate.
Albemarle's challenges continue
The price of lithium essentially drives the movement in the company's near-term and long-term earnings. Whereas the near-term considerations focus on the spot price of lithium (the price now) longer-term considerations assess the future supply-and-demand environment.
Near-term considerations
Unfortunately, both near- and long-term considerations have worked against Albemarle this year. After trading at around $13.5 per kg. in January, the price of lithium rose to above $16 per kg. in March. However, since the start of May, the price has slumped from about $15.25 per kg. to about $12.5 per kg. at the time of writing.
The price drop has led the market to lower earnings estimates for Albemarle, and a slew of Wall Street analysts have cut price targets and stock ratings. For example, Citi recently cut Albemarle's price target to $100 from $137 on expectations of lower lithium prices, and a Wells Fargo analyst also cut their price target to $100 from $145 due to the falling price of lithium.
Longer-term considerations
Turning to longer-term matters, the slowdown in electric vehicle (EV) sales this year has caused lithium bulls to pause for reflection on their assumptions about demand (the metal is used in the manufacture of batteries for EVs). Meanwhile, on the supply side, countries including Serbia, Argentina, and Bolivia are all aggressively trying to attract investment in lithium mining projects.
Image source: Getty Images.
A stock to buy?
Investors who are worried about the potential for near-term bad news should probably avoid the stock. In addition, while the demand side will undoubtedly improve as EV investment recovers, the supply side of the equation is a concern. There's no shortage of lithium in the world, and an increasing awareness of its importance is leading companies and countries to invest in mining it. That could have consequences for prices over the long term.
