Lithium miner Albemarle Corp. (ALB), experienced a significant drop in its share value after analysts at BofA Securities downgraded their rating on the stock to the equivalent of sell, from hold. They also lowered their price target from $212 to $161.
Shares of Albemarle Corp. dropped nearly 10% following the downgrade, placing them at their lowest close since April 20, 2021, when they closed at $148.52. Consequently, the stock emerged as the worst performer on the S&P 500 index on Wednesday.
Growth Plans and Debt Financing
According to the analysts at BofA Securities, Albemarle’s growth plans are likely to require over $2 billion in debt financing within the next two years. This additional debt burden is expected to negatively affect earnings and result in downward revisions to the company’s valuation. In contrast, Livent Corp. (LTHM), a peer company, is projected to manage its growth plans with minimal external financing.
Ratings and Outlook
Although the analysts maintained their buy rating on Livent’s stock, they expressed a comparatively neutral stance regarding Albemarle’s future prospects. They stated, “It is not that we see Albemarle shares as having material downside from here (though this could happen should our price forecast turn out to be optimistic), but we see better opportunities in our companies where earnings have moved through trough and are closer to an inflection.”
Albemarle shares have suffered a decline of approximately 30% since the beginning of this year, making it the company’s worst performing year since 2018. In contrast, the S&P 500 has experienced gains of around 14% during the same period.