Albemarle Corporation - NYSE:ALB - Comprehensive analysis
We believe Albemarle shares are undervalued, as lithium prices are currently at cyclically low levels. Demand from electric vehicle (EV) sales and utility-scale batteries is on the rise. However, the rapid influx of new, higher-cost, lower-quality supply from China and Africa has shifted the lithium market from undersupply to oversupply. Presently, lithium prices are significantly below the marginal cost of production, prompting supply reductions. We anticipate that prices will remain low in 2025, but expect demand to outpace supply, thereby decreasing the supply surplus. As demand continues to grow faster than supply in 2026, we foresee a return to market balance and a subsequent rise in prices. Albemarle's unit production costs are expected to decline as new capacity comes online and overhead costs are reduced. Consequently, Albemarle's unit profits should be higher on average in 2025 compared to the fourth quarter of 2024, even if prices stay at current levels. The company's competitive advantage, or narrow moat, is derived from its cost-effective lithium production, which benefits from unique geological resources. Lithium is Albemarle's primary business, contributing the majority of its profits. The main driver of lithium demand is electric vehicle batteries, which accounted for nearly 50% of demand in 2024. We project that EVs will represent one in three vehicles sold globally by 2030, up from nearly 14% in 2024. Additionally, we expect utility-scale batteries for energy storage systems to grow at a compound annual growth rate of 30% through 2030. Given the robust growth in end-market demand, we forecast lithium demand to increase to 3.2 million metric tons by 2030, up from 1.2 million in 2024. Supply is likely to struggle to keep pace with this demand, leading to an increase in lithium prices to the marginal cost of production, which we estimate at $20,000 per metric ton. As one of the lowest-cost lithium producers globally, Albemarle stands to benefit from the rising adoption of EVs, which will drive higher lithium prices and boost profits.
Free evaluation through quantitative algorithms Albemarle Corporation - NYSE:ALB
Growth-Scoring Model Detail
Total Revenue Growth Over Prior Year | -44.08 | Market 1 Sector 1 |
Gross Profit Growth Over Prior Year | -92.96 | Market 1 Sector 2 |
EBITDA Growth Over Prior Year | 0 | Market 0 Sector 0 |
EBITA Growth Over Prior Year | 0 | Market 0 Sector 0 |
EBIT Growth Over Prior Year | 0 | Market 0 Sector 0 |
Earnings from Cont. Ops. Growth Over Prior Year | 0 | Market 0 Sector 0 |
Net Income Growth Over Prior Year | 0 | Market 0 Sector 0 |
Normalized Net Income Growth Over Prior Year | -96.3 | Market 1 Sector 1 |
Diluted EPS before Extra Growth Over Prior Year | 0 | Market 0 Sector 0 |
A/R Growth Over Prior Year | -38.82 | Market 2 Sector 3 |
Inventory Growth Over Prior Year | -30.48 | Market 2 Sector 2 |
PPE Net Growth Over Prior Year | -1.89 | Market 25 Sector 39 |
Total Assets Growth Over Prior Year | -9.09 | Market 6 Sector 18 |
Tangible Book Value Growth Over Prior Year | -21.38 | Market 8 Sector 11 |
Common Equity Growth Over Prior Year | -17.91 | Market 7 Sector 13 |
Cash from Ops. Growth Over Prior Year | -47.03 | Market 5 Sector 13 |
CAPEX Growth Over Prior Year | -21.57 | Market 13 Sector 26 |
Dividend per Share Growth Over Prior Year | 0.63 | Market 37 Sector 66 |
Levered Free Cash Flow Growth Over Prior Year | 0 | Market 0 Sector 0 |
Unlevered Free Cash Flow Growth Over Prior Year | 0 | Market 0 Sector 0 |
Profitability-Scoring Model Detail
Gross Margin % | 1.57 | Market 5 Sector 9 |
SG&A Margin % | 11.07 | Market 42 Sector 60 |
EBITDA Margin % | -0.17 | Market 1 Sector 4 |
EBITA Margin % | -10.69 | Market 1 Sector 4 |
EBIT Margin % | -11.12 | Market 1 Sector 4 |
Earnings from Cont. Ops Margin % | -21.12 | Market 2 Sector 6 |
Net Income Margin % | -21.93 | Market 2 Sector 6 |
Net Income Avail. for Common Margin % | -24.47 | Market 2 Sector 6 |
Normalized Net Income Margin % | 0.94 | Market 3 Sector 28 |
Levered Free Cash Flow Margin % | -22.92 | Market 4 Sector 5 |
Unlevered Free Cash Flow Margin % | -20.99 | Market 3 Sector 5 |
Return on Assets % | -2.14 | Market 1 Sector 14 |
Return on Capital % | -2.69 | Market 1 Sector 14 |
Return on Equity % | -11.43 | Market 3 Sector 17 |
Return on Common Equity % | -15.36 | Market 3 Sector 17 |
Total Asset Turnover | 0.31 | Market 29 Sector 18 |
