Albermarle Shares Crash – Are Lithium Stocks Undervalued?

•
Albermarle
(ALB)
•
Lithium
Americas
(Argentina)
(LAAC)

Other
undervalued
lithium
stocks
covered
by
Morningstar
include:

•
Lithium
Americas
•
Arcadium
Lithium
•
Ganfeng
Lithium
•
SQM
(Chile)

Key
Morningstar
Metrics
for
Albemarle
Stock

•
Fair
Value
Estimate:
$300
•
Morningstar
Rating:
★★★★★
•
Morningstar
Economic
Moat
Rating:
Narrow
•
Morningstar
Uncertainty
Rating:
High

Shares
in
one
of
the
world’s
largest
lithium
producers,
Albermarle,
crashed
on
17%
on
March
5
after
it
revealed
a
$2
billion
equity
issue.
The
stock
is
off
25%
so
far
this
year.

The
company
plans
to
use
that
money
for
capital
investments
and
paying
down
short-term
debt.
This
was
a
surprising
move,
analyst
Goldstein
says,
as
Albemarle’s
balance
sheet
is
healthy.
The
issuance
will
have
a
dilutive
effect,
but
until
Albemarle
provides
more
information
on
the
terms
of
the
issuance,
he
is
maintaining
his
fair
value
for
the
stock
at
$300
per
share
and
thinks
the
stock
is
still
severely
undervalued
at
around
$109.

What’s
the
bull
case
for
Albermarle
stock?
Investing
in
lithium
companies
is
always
risky,
if
only
because
of
the
high
cost
of
mining
or
extracting
lithium
from
rocks
or
salt
lakes.
But
at
Albemarle,
Goldstein
says
this
risk
remains
contained,
as
it
only
extracts
lithium
from
locations
where
it
has
done
so
successfully
before.

There
is
also
a
potential
upside
for
Albermarle
if
lithium
prices
reverse
this
year
when
supply
starts
to
shrink.
Instead
of
developing
new
sites,
Albemarle
is
betting
on
intensifying
lithium
mining
at
already
existing
sites
in
Chile,
the
US,
Australia
and
China.

Key
Metrics
for Lithium
Americas
(Argentina)
Stock

•
Fair
Value
Estimate:
$25/CA$33
•
Morningstar
Rating:
★★★★★
•
Morningstar
Economic
Moat
Rating:
Narrow
• Morningstar
Uncertainty
Rating:
Very
High

Lithium
Americas
(Argentina) is
a
smaller
challenger
to
Albermarle
with
less
of
a
track
record,
having
been
spun
out
from
Lithium
Americas
(LAC).
But
Goldstein
says
the
stock
remains
the
most
undervalued
lithium
producer
under
our
coverage.
The
company
will
be
under
new
leadership
on
March
18
when
Sam
Pigott
will
become
the
president
and
chief
executive
(Morningstar
left
the
stock’s
fair
value
estimate
of
$25/$CA33
after
the
announcement).
Currently
the
shares
trade
at
below
$5
in
New
York,
having
fallen
25%
in
2024
so
far.

“We
view
Pigott
as
a
good
choice
to
lead
Lithium
Argentina.
He
brings
roughly
20
years
of
experience
in
mining,
lithium,
and
finance.
Pigott
spent
the
past
six
years
at
Ganfeng,
Lithium
Argentina’s
joint
venture
partner
at
the
Cauchari-Olaroz
project,
where
he
led
the
company’s
international
business
development
group,”
Goldstein
says.

He
continues:
“Our
bullish
view
comes
from
two
key
factors.
First,
we
think
market
sentiment
is
extremely
negative
on
the
direction
of
lithium
prices.
We
forecast
prices
will
rise
in
2024
and
average
around
$25,000
per
metric
ton
from
2024
through
2030.
Second,
we
think
the
market
is
not
giving
Lithium
Argentina
credit
for
long-term
volume
growth
at
Cauchari-Olaroz
or
successful
project
development
at
Pastos
Grandes.”

As
a
new
entrant,
Lithium
Argentina
does
carry
a
higher
risk,
Goldstein
says.
But
he
argues
that
Cauchari-Olaroz
is
poised
to
become
one
of
the
cheapest
lithium
extraction
projects
in
the
world.

The
newly
formed
Lithium
Argentina
made
money
for
the
first
time
in
the
fourth
quarter
of
2023,
producing
6,000
tonnes
of
lithium,
according
to
annual
production
figures
announced
by
Lithium
Argentina
in
early
January.
That
was
more
than
the
5,000
tonnes
the
group’s
board
had
previously
expected
to
produce.

But
there
is
political
risk
here.
The
Argentine
government,

under
new
president
Javier
Milei,
could
raise
export
tariffs.

What’s
the
Long
and
Short
Term
Outlook
for
Lithium?

Long-term
demand
is
expected
to
be
strong,
according
to
the
International
Energy
Agency
(IEA),
especially
as
the
world
moves
towards
2050
net
zero
targets.
Electric
vehicles
form
part
of
the
drive
towards
net
zero
for
transport
emissions,
but
here
the
demand
picture
is
not
as
clearcut
as
was
expected
a
few
years
ago.
Fewer
people
are
buying
EVs
because
of
the
high
cost,
despite
widespread
adoption
in
some
European
countries.
Chinese
demand
for
EVs
has
faltered
as
the
economy
has
struggled. 

Even
if
sales
of
EVs
pick
up
again,
lithium’s
central
role
in
this
revolution
is
not
secure.
After
all
it’s
a
scarce
resource
like
nickel
and
cobalt,
which
are
also
used
in
EV
batteries.
Many
countries
and
manufacturers
are
trying
to
diversity
away
from
rare
metals
in
the
production
provess.
In
the
future,
rechargeable
batteries
will
be
developed
that
no
longer
require
lithium,
some
industry
experts
predict.

But
Goldstein
is
optimistic
about
worldwide
EV
sales,
especially
as
more
charging
stations
come
on
stream.
He
argues
that
a
network
effect
will
start
to
kick
in
for
EVs;
as
more
people
buy
them
and
use
them,
their
functionality
and
affordability
will
improve
and
more
infrastructure
will
be
developed
to
support
them.
And
that
backs
the
case
for
increasing
lithium
demand
in
the
coming
years.
After
all,
the
IEA
forecasts
that
the
price
of
lithium
could
be
more
than
600%
higher
than
its
current
level
by
2050.

This
article
was
compiled
with
articles
from
Morningstar
Netherlands
on

lithium
stocks
and

worldwide
lithium
demand
by
Rentsje
de
Gruyter
(in
Dutch).

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