Baird: Albermarle Is The Best Lithium Cycle Play

A Baird analyst said he's a buyer of Albemarle Corporation ALB at current levels, with several impending catalysts offering a reason to look at the chemical manufacturer. 

The Analyst

Baird analyst Ben Kallo upgraded Albemarle from Neutral to Outperform and increased the price target from $135 to $152.

The Thesis

Albemarle's production expansions remain on track, and the company is the best way to play the multiyear lithium growth cycle, Kallo said in a Monday note. (See the analyst's track record here.) 

The lithium market is expected to remain in balance or "tight" for at least the next several years, the analyst said. 

The demand growth will keep pace with supply and could even surpass it in the intermediate term, according to Baird. 

Albemarle's production expansions remain on track, as the company continues to increase capacity, Kallo said. Execution is Albermarle'sbiggest risk factor, he said. 

The company's new technology could allow it to increase capacity over time, helping to lower cost and boost volumes over the long term, Kallo said. 

"While ALB has significant organic growth opportunities, the company's balance sheet provides optionality for making acquisitions." 

Baird sees the following as catalysts that could drive Albermarle shares higher: 

• Upcoming auto shows displaying new EVs.
• Potential auto OEM announcements regarding electrification.
• The ongoing ramp of Tesla Inc TSLA Model 3.

The Price Action

Albemarle shares are up about 49 percent over the past year. The stock was up 3.92 percent at $136.89 at the time of publication. 

Related Links:

Albemarle Downgraded With Little Opportunity Seen For Near-Term Upside

Albemarle, Bank Of America, And Other Stocks On Fast Money Traders' Radar