There’s been plenty of attention paid to the direction of the electric vehicle (EV) industry recently. After rapid growth from early adopters and fans of the products, growth seems to have notably slowed in 2024. One EV-related company feeling the effects of this slowdown is lithium supplier Albemarle (ALB 5.80%).
Wall Street analyst Vincent Andrews at Morgan Stanley recently sent out a note documenting just how much the slowdown in EV sales is impacting Albemarle. Andrews reduced his firm’s price target on the stock from $90 to $81 per share. If he is right, that implies a 35% downside for Albemarle stock as it is currently priced at around $125 a share. The analyst rates the shares the equivalent of a sell because of concerns that lithium demand is plunging along with EV demand.
Lithium prices plunge, hurting Albemarle
Charlotte, North Carolina-based Albemarle has already slowed spending on a new $1.3 billion lithium processing project planned in neighboring South Carolina. That’s because lithium prices have dropped as much as 90% since the start of 2023. Deferring spending on that project is just one sign that Albemarle is tightening its belt.
The company also just announced it was planning to raise $2 billion from the sale of new convertible preferred stock. The company said it will look to use the money to fund investments in lithium operations in Australia and China that are well underway or near completion. It will also use the money to repay outstanding debt.
Existing shareholders will likely be diluted by the capital raise. That’s one aspect of what makes shares less appealing right now, but the need to raise money with lithium demand and pricing down is also troubling. That helps explain why the Morgan Stanley analyst just dropped his firm’s price target on Albemarle by 10%.
Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
