If Albemarle is a buy with production growth projection similar...

If Albemarle is a buy with production growth projection similar to PLS then PLS is a BUY too. See this analyst's article.

More electric vehicles are being made and sold. More lithium is being used for batteries, and that’s good for the world’s biggest lithium miner, Albemarle.

Albemarle (ticker: ALB) on Tuesday told analysts and investors that it sees industry production volumes up about fivefold from 2022 to 2030. The company itself plans to triple capacity by 2027.

It was a strong outlook, and one of the reasons Piper Sandler analyst Charles Neivert launched coverage of Albemarle stock on Wednesday evening with a Buy rating and $310 price target. That’s a reflection of Albemarle’s strong earnings, which could grow at more than 20% a year on average between 2022 and 2024.

Growth in EV production is the single biggest driver for ALB shares over at least the next 3 to 5 years,” Neivert writes in a research report. “Albemarle is well positioned to continue to participate in the market growth.”

Still, Albemarle stock trades for about 10 times 2024 earnings, well below the S&P 500 ‘s 16 times. And even at Neivert’s target, Albemarle would trade for just around 12 times 2024 estimates.

That’s a reflection of lithium prices, which are elevated relative to history. Benchmark lithium prices are at about $60,000 a metric ton, up from pandemic prices of less than $10,000 a ton. No one expects lithium prices to stay up here. “The urgency around lithium supply will diminish,” adds Neivert. “We still see lithium prices remaining well above historical values of 2021-2022.”

The question is how much. Evercore ISI analyst Stephen Richardson believes prices will average about $30,000 a ton in the long run. He also rates Albemarle stock Buy. His price target is $295 a share.