Albemarle stock has had a rocky week despite a big earnings beat.
Carla Gottgens/BloombergLithium metal will be more in demand as the world shifts from gasoline-powered autos to electric vehicles. And that shift is part of the reason why lithium miner Albemarle stock snagged an upgrade from J.P. Morgan on Friday.
Shares of Albemarle (ticker: ALB) were up 5.7% in midday trading. The S&P 500 and Dow Jones Industrial Average, for comparison, are up about 0.8% and 0.5%, respectively. The stock is up about 9% year to date.
Analyst Jeffrey Zekauskas raised his rating from the equivalent of Sell to Hold and increased his price target to $152 a share from $125.
The upgrade comes after a rocky week for the stock. Shares fell 8.6% on Thursday after Albemarle reported first-quarter earnings. The company earned $1.10 a share; Wall Street was looking for 80 cents. Though it was a big earnings “beat,” the company left its full-year earnings guidance unchanged at a midpoint of $3.45 a share. Investors like guidance to go up by at least the amount of any earnings beat.
“Investors seem to have been looking for higher volumes, more robust prices, and sharper upward growth rates in [operating profits],” wrote Zekauskas in his report. He pointed out, however, that Albemarle is operating its lithium facilities at almost full capacity and that most lithium pricing is negotiated annually.
To the analyst, the quarter was fine and the outlook is better. “China lithium prices have risen sharply and electric vehicle demand has been strong near-term,” he added. “The company is leaving a period of weaker earnings performance and should soon begin a period of greater positive earnings growth.”
Zekauskas estimates 2021 earnings of $4.20 a share, higher than company guidance. His 2022 and 2023 earnings estimates are $5.75 and $7.55, respectively.
The upgrade, however, is only to Hold—not a full endorsement of the stock. Shares look pricey relative to their history. Albemarle stock trades about 45 times estimated 2021 earnings. Over the past few years, Albemarle’s PE ratio has averaged about 20 times.
But the valuation multiple is up because investors now expect electric-vehicle penetration of new car sales to rise rapidly. That means more rechargeable lithium ion batteries and more demand for Albemarle products.
Zekauskas’ projected earnings growth between 2021 and 2023 is about 34% a year on average. Albemarle reported earnings actually declined from about $5.50 a share to $4.12 between 2018 and 2020.
About 46% of analysts covering Albemarle stock rate share Buy. The average Buy-rating ratio for stocks in the S&P is roughly 55%. The average analyst price target is $160 a share, right around where the stock is trading.
Write to Al Root at allen.root@dowjones.com
"electric" - Google News
May 07, 2021 at 11:09PM
https://ift.tt/3vOhW3Z
Lithium Miner Albemarle Snags an Upgrade. Electric Vehicles Are a Driver. - Barron's
"electric" - Google News
https://ift.tt/2yk35WT
https://ift.tt/2YsSbsy
Bagikan Berita Ini
0 Response to "Lithium Miner Albemarle Snags an Upgrade. Electric Vehicles Are a Driver. - Barron's"
Post a Comment