Albemarle rated new Overweight at Piper Sandler driven by lithium growth (NYSE:ALB)

Albemarle (NYSE:ALB) +3.3% in Thursday’s trading as Piper Sandler launched coverage with an Overweight rating and 12-month price target of $310, expecting lithium growth will drive sharply higher earnings.

“Based on consensus 2024 EV/EBITDA multiple of 6.9x, the market seems to be applying a multiple more commonly associated with cyclical shares, and indicative of not only peak earnings but a significantly lower trough at some point in time,” Piper’s Charles Neivert wrote, but sees Albemarle (ALB) “transitioning from a cyclical play to one more associated with growth, deserving a multiple more in line with its historical performance.”

Neivert sees Albemarle (ALB) as basically a lithium pure play on a going forward basis, estimating FY 2022 EBITDA from the current operating structure at $3.5B, of which 90% is from the lithium segment; looking forward, “this share should exceed 90% of EBITDA, driven by lithium pricing, which we see leveling off in 2023 and slightly declining in 2024, and significant volume expansions.”

Albemarle (ALB) recently forecast an 800K-ton global lithium deficit by 2030 with prices staying high.