Albemarle Downgraded With Little Opportunity Seen For Near-Term Upside

Baird downgraded shares of Albemarle Corporation ALB, saying near-term execution is largely priced into the stock. This downgrade comes despite the firm having said Albemarle is positioned to capture growth in the lithium market.

The firm downgraded shares of Albemarle from Outperform to Neutral, with a $135 price target.

At last check, shares of Albemarle were down 3.33 percent at $129.82.

Analyst Ben Kallo noted shares are currently trading at more than 17 times his 2018 EBITDA estimate. Although the market continues to determine the appropriate multiple for Albemarle's lithium business, the analyst believes the shares are fully valued at current levels.

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Baird said, as the valuation continues to move higher, thanks to several recent headlines surrounding electric vehicle demand and favorable regulatory news, headline risk increases. The firm is of the view that the growth in battery demand is largely priced in at current levels.

Additionally, the firm feels headlines about capacity increases from competitors or a flattening lithium price curve could negatively impact the stock (see Kallo's track record here).

Baird did not rule out the possibility of upside to its and Street estimates for 2018, although it thinks investors have higher expectations. The firm currently estimates 2018 revenues of $3.1 billion and earnings per share of $4.74. The consensus estimates call for revenues of $3.2 billion and earnings per share of $5.01.

Meanwhile, Baird believes investors looking to deploy capital in the lithium market may increasingly consider Sociedad Quimica y Minera de Chile (ADR) SQM as an alternative investment, as it resolves political challenges.

"We continue to believe lithium is in a multiyear growth cycle and ALB is well positioned given its diverse and quality resources, although we will wait for a better entry point before becoming more constructive," the firm concluded.

Related Link: Oppenheimer Rates Albemarle Outperform, Sees 17% Upside From Here _______ Image Credit: "Albemarle containers" By Gazouya-japan, CC BY-SA 4.0, via Wikimedia Commons