We recently compiled a list of the 12 Biggest Lithium Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Albemarle Corporation (NYSE:ALB) stands against the other lithium stocks.
Lithium is a soft, silver-white alkali metal that has become a cornerstone of the clean revolution. Its commonly used form, lithium carbonate, is required for the production of lithium-ion batteries. These power a variety of technologies, including vast renewable energy storage systems and electric vehicles (EV), making them nearly indispensable in the development of sustainable energy solutions. Although EVs have been available for a while, it wasn’t until recent technology breakthroughs and cost reductions that they became a more reliable option for consumers, resulting in an increase in lithium demand. The International Energy Agency states that the demand for lithium will climb by over 40 times between 2020 and 2040, particularly for use in battery storage and electric cars. As per Fortune Business Insights, the global lithium market achieved a valuation of $22.19 billion in 2023 and is expected to reach $134.02 billion by 2032, reflecting a CAGR of 22.1%.
According to a McKinsey report, the global drive to net-zero will depend on guaranteeing a consistent supply of essential battery raw materials, especially as demand for EVs climbs toward the latter of this decade. Based on the report, the global market for BEV passenger cars is expected to increase sixfold between 2021 and 2030, with yearly sales rising from 4.5 million to almost 28 million units during that time. In addition, such a forecast indicates that the sector is “likely to confront persistent long-term challenges” in line with demand. McKinsey also states that 80% of all lithium mined now is used by battery manufacturers, and by 2030, that number may rise to 95%.
On the other hand, analysts predict increased volatility in lithium carbonate in 2024, following a challenging year in which the metal’s price plunged 22% due to a global supply glut. However, some balance is expected to recover. S&P Global predicts that as production cuts begin to reduce excess supply, lithium surplus would fall to 33,000 metric tons in 2025 from 84,000 metric tons in 2024. According to Chris Berry, president of House Mountain Partners, however, the behavior of the lithium price over the next year may be unpredictable. He said the following:
“Lithium price volatility is a feature of the energy transition and not a bug. You have a small but fast-growing market, opaque pricing, legislation designed to rapidly build critical infrastructure underpinned by lithium and other metals, and this is a recipe for boom-and-bust cycles demonstrated by extremely high and extremely low pricing.”
Our Methodology
For our list of the 12 biggest lithium stocks to buy, we narrowed down companies involved in lithium mining and supply, lithium-ion battery sales, or technologies related to battery operations. The names on this list are ranked in ascending order according to the hedge fund sentiments surrounding them, using data from Insider Monkey’s Q3 2024 database.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of scientists in a laboratory observing the sophisticated engineering of specialty chemicals.
Albemarle Corporation (NYSE:ALB)
Number of Hedge Fund Holders: 36
Albemarle Corporation (NYSE:ALB) specializes in engineered specialty chemicals. Its Energy Storage division specializes in recycling, technical services, and lithium compounds. The company holds a strategic position within the EV supply chain on account of its dominance in the lithium market, with EV customers accounting for more than 80% of its sales. Albemarle’s portfolio is further diversified by its status as a pioneer in catalyst products and one of the top three bromine producers. As of 2020, Albemarle Corporation (NYSE:ALB) was the largest provider of lithium for electric vehicle batteries.
Truist Securities began coverage of Albemarle Corporation (NYSE:ALB) on January 27, giving it a Hold rating and a price target of $96. The analyst firm noted Albemarle’s proactive approach to mitigating the risks associated with a potential low-price environment. Albemarle’s decision to stop growth expenditures and pursue cost-cutting measures in the event of a market downturn is seen as a prelude to continuing operations. However, Truist thinks that the company’s 2025 and 2026 financial results might not live up to expectations.
During its Q3 2024 earnings call, Albemarle Corporation (NYSE:ALB) revealed that lower lithium prices had caused a sharp decline in net sales and earnings, resulting in a $1.1 billion loss and a $211 million drop in adjusted EBITDA. To address these issues, the company reported making strategic changes, including the reduction of capital expenditures by almost half for 2025 and introducing a new operating structure that should save $300 to $400 million.
Overall ALB ranks 3rd on our list of the biggest lithium stocks to buy according to hedge funds. While we acknowledge the potential of ALB as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ALB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
