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Albemarle (NYSE:ALB) +1% in Thursday’s trading despite a downgrade from Wells Fargo, which lowers shares to Equal Weight from Overweight with a $100 price target, cut from $145, even after recently dropping to nearly four-year lows.
Wells Fargo analyst Michael Sison says confidence in his earnings outlook has deteriorated as lithium prices have fallen below his expectation of holding ~$15K LCE, and lithium supply could outweigh demand longer than expected, given risks to electric vehicle demand.
Sison also views Albemarle’s (ALB) recent convertible equity raise compared with other forms of capital such as debt as a negative, reflecting potential cash flow risks ahead.
Wells Fargo says it remains positive on the chemicals sector as the group tends to outperform in early parts of a recovery, with oil prices still firm and positive Y/Y volume growth expected in upcoming Q2 reports.
The bank’s top picks in the space include Westlake (WLK) due to strong market and share growth within its HIP segment, with LyondellBasell (LYB) its preferred way to play upside to polyethylene pricing.
International Flavors and Fragrances (IFF) is Wells Fargo’s top specialty play, expecting self-help margin improvement will drive a Q2 beat and full-year guidance raise.