Market Overview

Morgan Stanley Downgrades Albemarle On Supply, Pricing Concerns

Morgan Stanley Downgrades Albemarle On Supply, Pricing Concerns

Less than a week after Argus initiated coverage of Albemarle Corporation (NYSE: ALB) with a Buy, another sell-side analyst assumed a different, bearish stance on the chemical company. 

The Analyst

Morgan Stanley analyst Vincent Andrews downgraded Albemarle from Equal-weight to Underweight and decreased the price target from $100 to $85.

The Thesis

The lithium market is projected to experience both "significant oversupply" and price drops as soon as 2019, Andrews said in a Monday note, citing his updated lithium supply and demand model. (See the analyst's track record here.) 

This will lead to a material reduction to Morgan Stanley's existing 2020-and-later EBITDA forecasts, he said. 

A more-than-expected increase in volume would offset some of the lithium price declines, Andrews said. A new technology initiative the company announced on Sept. 15 and an increase in annual quota from Chile for capacity expansion could help, he said. 

The two catalysts have the potential to drive up supply, putting further pressure on prices, Andrews said. 

"We have been far less bullish on lithium than the equity market for some time now." 

Bullish forecasts for the penetration rate in the electric vehicle market "seem aggressive" and rely too much on automakers' manufacturing promises without giving enough consideration to the consumer value proposition or needed infrastructure, the analyst said. 

Morgan Stanley expects a 9-percent EV penetration rate in 2025 compared to the 13-percent rate needed to maintain status quo. 

"Net, we think it is far more likely that EBITDA multiples mean revert lower (toward 12-times EBITDA) than back to 2017's peak (25 times)," Andrews said of Albemarle. 

The Price Action

Albemarle shares are up about 23 percent over the past year.

Albemarle shares were down 3.49 percent at $114.70 after the open Monday. 

Related Links:

Baird: Albemarle Is The Best Lithium Cycle Play

Oppenheimer Rates Albemarle Outperform, Sees 17% Upside From Here

Latest Ratings for ALB

Aug 2019MaintainsUnderweight
Aug 2019ReiteratesBuy
Aug 2019MaintainsOutperform

View More Analyst Ratings for ALB
View the Latest Analyst Ratings

Posted-In: chemicals Electric Vehicle EVAnalyst Color Downgrades Price Target Top Stories Analyst Ratings Best of Benzinga


Related Articles (ALB)

View Comments and Join the Discussion!

Latest Ratings

View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at

A Bond ETF For Commodities Upside

Morgan Stanley Gets Wise On Sage Therapeutics, Initiates With A Buy