Albemarle is Tuesday's IBD Stock Of The Day, as analysts expect the U.S.-based lithium giant to ride increased lithium prices to booming 2022 profits. ALB stock rose Tuesday, working on a possible handle.
Charlotte, N.C.-based Albemarle is the world's largest lithium producer and one of the leading providers of lithium for electric batteries. The company already supplies the crucial metal to Tesla. Along with its lithium segment, the chemical manufacturing company also has bromine and chemical catalyst refining operations.
Lithium is the highly efficient energy storage medium used in virtually all batteries currently powering electric vehicles as well as consumer electronics. Lithium batteries also dominate the booming energy storage business for home and utility scale.
The Lithium Stock Outlook For 2023: A Cartel On The Horizon?
Throughout 2022, increased lithium prices resulted in booming profits for Albemarle. The lithium producer has averaged EPS growth of 334% over the last three quarters. The Benchmark Minerals' Lithium Price index soared 156% in 2022.
Lithium carbonate spot prices in China, the biggest EV market and a huge user of lithium, were around $71,000 per ton in January. This is down about 20% from record high prices of $84,000 per ton in November. Prices in China, which also handles most of the world's lithium refining, started 2022 at 244,510 yuan, or $34,700 per ton.
Albemarle Stock: Lithium Forecasts
Many analysts expect lithium prices to retreat in 2023 with supply outstripping demand. However, Albemarle has increased its demand forecast due to higher expected EV production, as well as stronger demand for other lithium-ion battery applications.
On Jan. 24, Eric Norris, president of energy storage, told investors Albemarle expects 2030 lithium demand at 3.7 million tons, up 15% from its prior forecast.
The International Energy Agency (IEA) has predicted annual lithium demand will increase to 2.5 million tons by 2030, up from around 500,000 tons today.
"Our updated demand outlook reflects our tremendous growth over the past year and accelerated future growth related to the U.S. Inflation Reduction Act, or IRA," Norris said.
"While government support like the IRA certainly helps, the reality is that the EV revolution is here to stay. In some regions and markets, EVs have already reached the tipping point of cost parity," he added.
Albemarle Stock
ALB shares advanced 3.5% to 281.45 Tuesday during market trade. Albemarle stock has formed a 38% V-shape base, according to MarketSmith analysis. ALB stock has an official 334.65 buy point. Shares have vaulted back above the 50-day and 200-day lines, working up the right side of the base. It's possible that Albemarle is working on a handle, but that needs a few more days.
ALB stock hit a record 334.55 high on Nov. 11, but then sold off amid concerns that lithium prices would fall off in 2023, in part due to weaker-than-expected EV adoption amid high costs and recession worries. But price cuts from Tesla and others have revived EV sales prospects.
On Jan. 23, Albemarle reported preliminary Q4 earnings comfortably above views at the time and gave generally upbeat 2023 guidance.
Albemarle Plots Decade-Long Lithium Charge With Demand Racing Past Supply
Albemarle will report fourth-quarter results on Feb. 15. Analysts now predict Q4 earnings will balloon 712% to $8.21 per share, with revenue up 193% to $2.62 billion. For 2022, analysts expect Albemarle earnings up 430% to $21.48 per share, with sales jumping 120% to $7.3 billion.
Albemarle expects 2023 sales of $11.3 billion-$12.9 billion and adjusted EPS of $26-$33. The company predicts capital expenditures of $1.7 billion-$1.9 billion.
Meanwhile, Wall Street expects 2023 EPS growing 30% to $28.18 and revenue increasing 52% to $11.1 billion.
Albemarle stock has a 99 Composite Rating out of 99. It has an 87 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement that tops at 99. The stock's EPS rating is a solid 91.
Other Lithium Stocks
In addition to Albemarle stock, lithium stocks Sociedad Quimica Y Minra and Livent have both advanced in January. SQM has shot up more than 21% so far in 2023 while LTHM spiked more than 30%.
Exchange traded funds covering the space have also rebounded. The Global X Lithium & Battery Tech ETF gained 20%, recently retaking the 200-day line. ALB stock and SQM are notable holdings, along with Tesla and China EV and battery giant BYD. The Amplify Lithium & Battery Technology ETF has jumped 19% this month.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
