Morningstar

Albemarle Earnings: Shares Fall on Lithium Price Decline Despite Positive Free Cash Flow Guidance

We remain bullish on lithium over the long term.

The Albemarle company logo is seen displayed on a smartphone screen.
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Securities in This Article
Albemarle Corp
(ALB)

Key Morningstar Metrics for Albemarle

What We Thought of Albemarle’s Earnings

Albemarle ALB reported second-quarter results largely in line with the cadence for the year. Profits were down due to lower lithium prices, but the decline was partially offset by reduced unit production costs and overhead expenses. Albemarle shares were down slightly at the time of writing.

Why it matters: Lithium price movements will continue to be the largest driver of Albemarle’s profits and stock price. Over the past week, lithium futures prices hit a limit up and a limit down. In response, Albemarle shares rallied and plunged, in line with future price movements.

  • However, management aims to reduce operating costs and capital expenditures in response to low prices. As a result, Albemarle now guides to positive free cash flow generation in 2025. We thought this would occur in 2026 and credit management with accelerating its cost reduction plan.

The bottom line: We maintain our $200 fair value estimate for narrow-moat Albemarle. We slightly reduced our near-term lithium price forecast to reflect lower spot prices. We also reduced our capex forecast as Albemarle has been able to reduce capex by a larger degree than we previously thought.

  • We view Albemarle as materially undervalued, with the stock trading at less than 35% of our fair value estimate and in 5-star territory. Shares trade around our downside scenario, which produces a fair value estimate of $70 and assumes lower lithium prices remain throughout the next decade.

Big picture: We remain bullish on lithium over the long term. Over the next couple of years, we expect demand will continue to grow at a double-digit rate, while low prices cause supply to grow slower. This will reduce the current supply surplus and move the market into balance, sending prices higher.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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