It's Not Too Late To Jump On Albemarle's Bandwagon; Baird Upgrades To Outperform

Although Albemarle Corporation ALB shares meaningfully appreciated in 2016, Baird’s Ben Kallo believes there still is substantial upside potential to the stock, given that the company is in the early stages of a multi-year cycle of lithium demand.

Kallo upgraded the rating on the company to Outperform, while raising the price target from $81 to $118.

Well Positioned

“ALB appears well positioned in a growing lithium market and should benefit from ramping production capacity, increasing lithium prices, and demand growth driven, in part, by batteries for electric vehicles and energy storage,” the analyst explained.

Although additional lithium production is expected to come online to support the growth in electric vehicles and storage, Kallo that this is just the beginning of a multi-year growth cycle, and Albemarle’s shares should benefit until meaningful capacity comes online.

Delevering

In addition, following the Chemetall sale, the analyst believes that Albemarle now has balance sheet flexibility for capital allocation to accelerate organic lithium growth, undertake bolt-on acquisitions and share buybacks or increase its dividend.

“ALB has a strong position in catalysts, a business which we recommend investors own. We expect continued high demand for FCC catalysts and believe the Refining Solutions segment could grow in the mid-single digits in 2017,” Kallo went on to say.