Albemarle in the vortex of falling lithium prices: Analysts remain optimistic

The latest quarterly report from Albemarle has recently caused a stir. The results of the second quarter massively disappointed Wall Street's expectations. While analysts had projected a profit of $0.41 per share, the company could only report a pro forma adjusted profit of $0.04 per share. According to generally accepted accounting principles, the quarter even ended with a loss of $1.96 per share. These results triggered immediate reactions on Wall Street. UBS promptly reduced its price target to $101 per share, while Baird lowered it to $102 and Bank of America to $126. Oppenheimer, however, remained the most optimistic and maintained a price target of $176 per share. Albemarle attributes this loss to weaknesses in the lithium market, particularly impairments of capital projects and associated contract termination costs. These charges exceeded the loss itself and accounted for the entire loss in the second quarter. But what does this mean for investors? According to Bank of America, spot prices for lithium continue to decline. With globally overfilled inventories, there is little hope for a price recovery before the end of 2024. Albemarle itself forecasts an average price of $15 per kilogram for this year - 40% below the level in the first half of 2023. Despite the bleak figures, there is a silver lining: Lithium is a cyclical industry. Historically, low prices often lead to increasing demand, eventually resulting in higher prices. Therefore, Albemarle might still become an attractive investment in the medium term. Interestingly, the analysts at The Motley Fool Stock Advisor have recently not chosen Albemarle but ten other stocks as the best investments. This selection includes companies that could achieve significant returns in the coming years - similar to Nvidia in 2005, whose stock value has increased fortyfold since being added to their recommendation list. Bank of America is a promotional partner of The Ascent, a Motley Fool company. Analyst Rich Smith holds no positions in the stocks mentioned, while The Motley Fool holds positions in and recommends Bank of America.