Does Investment in Mining Giant Albemarle Corporation Make Sense Right Now?
Albemarle Corporation (NYSE:
ALB) is a Charlotte-based
specialty chemicals manufacturing company. It operates through
three major divisions: Lithium, bromine specialties, and catalysts.
As per 2020 figures, the company is the largest provider of lithium
for electric vehicle (EV) batteries. It also serves several other
markets such as energy storage, petroleum refining, consumer
electronics, construction, automotive, lubricants, pharmaceuticals,
and many more.
While the company is a major
player in the growing lithium space, it isn’t completely immune to
the inflationary waves and rising interest rates, as Albermarle
stock has lost around 15% this year. Compared to the broader
market, the performance of Albemarle stock has been significantly
Considering the potential of the
lithium industry as well as the hold Albemarle has in this space,
the market is quite optimistic regarding the performance of this
Lithium demand is growing
Agency estimates that
over the next 20 years, lithium demand will expand at a CAGR
(compounded annual growth rate) of 20.3%, potentially increasing by
more than 40 times. The expansion of this new sector of the economy
has been largely fueled by the rising output levels of consumer
electronics and electric vehicles.
By the end of this year, it is
predicted that 670,000 EVs will have been sold in the U.S. alone,
an increase of 37%. The price of lithium is also trending upward as
a result of this significant mismatch in supply and demand, which
is beneficial to the stakeholders in the market.
Albemarle is one of the principal
players in the lithium market, and its lithium business is one of
the major driving forces behind its development. In the previous
year, the companyU+02019s lithium section expanded at a 19% rate
while its overall sales increased by 6%. Additionally, the lithium
division accounts for 55.1% of its EBITDA and 41% of its overall
Albemarle has made major
investments in the growth of its lithium segment in recognition of
the opportunities in this sector. Along with M&A activity,
the company had also amplified its production at
the Greenbushes mine, one of the largest lithium reserves, to
reach a capacity of 160,000 metric tonnes annually.
Albemarle should report handsome
profits as lithium demand increases further.
Albemarle is witnessing financial growth
The growth in product demand for
Albemarle has had a favorable impact on the companyU+02019s
financials. Despite dealing with inflation and a number of other
geopolitical obstacles in the
first quarter of this
year, the company managed
to increase its revenues by 36% year over year to $1.3
The growth is actually 44% when
the impact of the Fine Chemistry Services business sold by it last
year is taken out. However, the adjusted diluted EPS of $2.38 rose
by a staggering 116%, showcasing its operating leverage.
Additionally, Albemarle was able to report an adjusted EBITDA of
$432 million, representing a noteworthy 88% gain.
forecasts for this year
have also been updated by Albemarle
twice this time in light of the rising prices for lithium and
bromine. The company anticipates its sales to range between $5.8
billion and $6.2 billion and believes that its adjusted EBITDA
might range between $2.2 billion and $2.5 billion.
The stock is currently priced at
$220, and the average target price is $271, a potential upside of
over 20%. Albemarle has been operating its business successfully
and has a bright future ahead of it. The stock is doing
substantially better than most others on the market, thanks to the
growth in the lithium sector. Although the PE of 87.25 times makes
the stock relatively expensive, considering the potential future
gains, buying Albemarle Corporation stock looks
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