Joel Jackson, an analyst from BMO Capital, has initiated a new...

Joel Jackson, an analyst from BMO Capital, has initiated a new Hold rating on Arcadium Lithium Plc (ALTM).Geoff Meacham has given his Hold rating due to a combination of factors affecting Arcadium Lithium Plc’s market position and future prospects. The company, holding approximately a 7% market share, is born from the merger of two entities and is now a pure-play lithium producer. Meacham’s assessment considers the potential for a lithium sector re-rating if market conditions, such as lithium prices and multiples, improve. However, despite this potential for sector-wide recovery, he sees more attractive investment opportunities elsewhere, given the risk/reward profile presented by Arcadium Lithium, which is influenced by known operational challenges and uncertainties surrounding its recent merger. The geopolitical risks associated with operations in Argentina, where a significant portion of the company’s assets are located, also play a role in the Hold rating.The valuation of Arcadium Lithium at a $7.00 target price is justified by Meacham’s projection of the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) reaching a low in 2024 before increasing annually as expansions ramp up and lithium prices are forecasted to rise. He aligns his estimates with the broader sector’s expectations of a sustainable price floor for carbonate lithium, driven by production costs in other regions. The analyst’s target price reflects a multiple that is consistent with peer trading levels and incorporates an optimistic scenario of successful execution of the company’s expansion plans and a lithium price above current spot levels. However, he notes that there is both upside potential if lithium prices exceed expectations and downside risk if prices fall, with additional considerations for execution challenges, inflation, and political risks in Argentina, which could influence Arcadium Lithium’s operations and development projects.In another report released on January 4, Mizuho Securities also assigned a Hold rating to the stock with a $8.00 price target.