Albemarle Corporation (ALB +2.75%) stock tumbled 10.2% through 10:20 a.m. ET Friday, and it's not hard to figure out why. Over the last two days, not one, not two, but four separate analysts have lowered price targets on the lithium miner.
That's the bad news. The good news is that every single one of these analysts still thinks Albemarle stock is underpriced, and most think the stock remains a buy.
NYSE: ALB
Key Data Points
What Wall Street says about Albemarle stock
Albemarle stock reported its Q2 earnings Wednesday evening -- a massive miss, with Wall Street forecasting $0.41 per share but Albemarle producing only $0.04. Even worse, the $0.04 "profit" was only a pro forma (adjusted) number. When calculated according to generally accepted accounting principles, Albemarle ended up with a $1.96-per-share loss.
Wall Street was quick to react. No sooner had Albemarle reported than UBS cut its price target to $101 per share. This morning, Baird cut to $102, and Bank of America lowered its estimate to $126. Oppenheimer, the most optimistic of the bunch, still thinks Albemarle stock is worth $176.
Is Albemarle stock a buy?
Albemarle blamed its loss on weak lithium prices causing "capital project asset write-offs and associated contract cancellation costs." Indeed, these charges were bigger than the loss itself, and accounted for the entirety of the company's losses in Q2.
What does this mean for investors? As Bank of America explains, lithium spot prices are still falling. And with global lithium inventories overflowing, the law of supply and demand tells us there's essentially no chance pricing will improve before the end of 2024. (Albemarle itself forecasts prices will average just $15 per kilogram this year, 40% below H1 2023 prices).
If there's any good news in all of this, it's that lithium is a cyclical industry, and in cyclical industries, low prices generally beget growing demand, which in turn leads to higher prices down the road. Albemarle stock might actually be a good buy one day.
It's just that today is not that day.
