Some investors gravitate towards controversial market plays, attracted by the significant upside potential. Albemarle Co. (NYSE: ALB) deserves attention today, especially after its 34% drop since May 2024. Despite recent discouraging price action, the fundamentals of this company may signal a potential rally ahead.
The market's focus has largely been on the tech sector, particularly stocks like NVIDIA Co. (NASDAQ: NVDA) in artificial intelligence and Tesla Inc. (NASDAQ: TSLA) in electric vehicles, despite its recent questionable rally. Investors should also pay close attention to major stock rallies in other sectors.
Albemarle stands out, as it specializes in lithium mining and processing—key for batteries powering the electric vehicle revolution.
How EV Growth is Powering Albemarle's Stock Potential
There’s no question that electric vehicles are becoming more widely adopted in the global economy today. From North America to Europe, to even all around Asia, it is companies like Tesla Inc. (NASDAQ: TSLA) or China’s own BYD (OTCMKTS: BYDDY) that are driving most of the growth in deliveries, which broke the million mark on 2023, and not something they are likely looking to give up.
Recently, to keep competition at bay and protect the U.S. lead in electric vehicle development, the current administration slapped tariffs on Chinese EVs of up to 100%, keeping domestic demand focused on companies like Tesla. Now, with the government aiming to control the supply chain for these vehicles and support key players, it's no surprise that Albemarle topped the list.
Recently, the U.S. Department of Energy (DOE) granted Albemarle up to $150 million in capital to build an American-based lithium facility. This will support domestic lithium production and keep the electric vehicle supply chain onshore.
However, Albemarle is not only dependent on electric vehicle waves to make its growth prospects shine; some of the company’s biggest clients are also exposed to the growing demand and breakthroughs in artificial intelligence. To name a few, Samsung Electronics Co. (OTCMKTS: SSNLF) is exposed to the chips and semiconductors market, along with Panasonic Holdings Co. (OTCMKTS: PCRFY).
Albemarle is benefiting from several bullish trends, and investors recognize that these industries are still in their early stages. The question is now centered on how much upside there could be in the stock moving forward, and that’s where Wall Street analyst forecasts come into play.
Albemarle's Stock Forecast: Wall Street Predicts Major Upside
Today, Wall Street analysts forecast up to 171% growth in earnings per share (EPS) for the next 12 months. Leaning on these predictions, analysts at Oppenheimer felt comfortable enough to slap a valuation of $178 a share for Albemarle stock, daring it to rally by as much as 83.7% from where it sits today.
Considering that these price targets were set in July 2024, they become more critical for investors now that the stock has declined for over a month. Analysts rarely stick their necks out to boost a stock experiencing bearish price action, so these analysts see that much upside today means twice as much for investors.
Knowing that several tailwinds are pushing Albemarle's momentum and analysts are starting to wake up to these facts, the Vanguard Group decided to boost its stakes in Albemarle stock by 0.2% as of May 2024. While that percentage term may not sound like much, it would translate into a net investment of $1.9 billion today.
Putting Albemarle stock into a discount perspective, investors can start with price action. The stock now trades at only 39% of its 52-week high, which drove all the other valuation metrics into a steep discount compared to the rest of the basic materials sector.
Against the industry’s average price-to-earnings (P/E) ratio of 99.2x, Albemarle’s valuation of 32.9x will offer investors a discount of 66.8%. However, investors can also lean on other metrics, such as the price-to-book ratio. Albemarle’s 1.1x valuation also provides a discount of 69.4% compared to the industry’s 3.6x P/B multiple today.