Evercore ISI Downgrades Albemarle (ALB) to In Line

Evercore ISI analyst Stephen Richardson downgraded Albemarle (NYSE: ALB) from Outperform to In Line with a price target of $88.00.

The analyst comments "With little reason to believe lithium price recovery lies ahead this year and our 2025 bridge math pointing toward $875 mm in EBITDA at $12/kg (17% below consensus at $1.05 Bn), we are downgrading ALB to In-Line along with the transfer of lead coverage to Eric Boyes. EBITDA appears on pace to contract in 2025 for the third consecutive year. Pending decisions on activity curtailment at JV projects in response to lithium demand could conceivably result in lower volumes for ALB in 2025. Lithium forward curves suggest ASPs will also be lower y/y, particularly without 1Q24’s ASP of ~$19/kg in the full year average. While October’s covenant amendments arranged sufficient leverage ratio headroom for the year, capex+divy outspend raises questions for ’26 as covenant limits revert should price remain flat. Still an IG issuer, ALB retains multiple levers at its disposal (to include the long suggested monetization of Ketjen) but uncertainty here likely weighs on the stock in the interim. Absent further reductions in maintenance capex, we estimate lithium price needs to rise >30% to $13-14/kg to organically fund the program. Lithium volumes have not left the market in this trough as much as most expected so the marginal cost of supply is clearly lower. While the downcycle has quelled capital formation, with arguably cascading effects later in the decade, more entrants with deeper pockets and a longer view (XOM, RIO, etc) make one believe the cost curve could remain under pressure regardless of what the demand function does – and it likely continues to grow globally at a healthy clip. We believe the EV transition continues to be a matter of when (not if) and that ALB will play a critical and profitable role in the supply chain, however probable EV policy adjustments only further reduce the likelihood of demand recovery during 2025. We are resetting our 12-mo PT to $88 to reflect 9.5 times 2026 EBITDA of $1.4 Bn at $15/kg."

For an analyst ratings summary and ratings history on Albemarle click here. For more ratings news on Albemarle click here.

Shares of Albemarle closed at $82.48 yesterday.

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