Lithium Stocks Sell Off on Broker Downgrade Based on Price Outlook Below Marginal Cost of Production

On Nov. 6, shares of lithium producers Albemarle, Livent, and SQM fell on a broker downgrade. After reviewing the note, we see no reason to change our fair value estimates for the three narrow-moat companies. At current prices, we view all three lithium producers as materially undervalued relative to our base-case fair value estimates. Albemarle and Livent both trade at roughly 40% of our $300 and $38 fair value estimates, respectively, and in 5-star territory. SQM trades at a little less than 50% of our $95 per share fair value estimate. Along with Lithium Americas and Lithium Argentina, we view these five stocks as the most undervalued among our specialty chemicals coverage.