Closed with Stop-Loss, loss is about 10%
ALBEMARLE CORP (NYSE:ALB)
Buy: market ($79)
Take profit: $104
On April 23, the company's share price fell by 5%, that is associated with the fear of a decline in demand for electric cars in China after changes in subsidies take effect.
However, the global trend for the use of renewable energy sources should improve the situation with ALB shares. Lithium is a fundamental component for the energy accumulation and release in batteries operating near wind and solar power stations, inside electric vehicles and any autonomous gadgets. In addition, lithium is currently used by SpaceX to manufacture fuel tanks in their FALCON9 missiles.
In 2018 the company showed a 10% revenue growth, while operating profit increased by 23%. The revenue share of Albemarle from lithium was 36%, but this segment brought 47.5% EBIDTA.
In 2018, ALB almost reached its main competitor, Sociedad Química y Minera de Chile (NYSE: SQM), in terms of lithium business margin lagging behind the Chilean giant by only one percent - 42.3% of ALB against 43.3% of SQM.
At the end of 2018, ALB entered into a partnership with Mineral Resources (ASX: MIN) to establish a mine with hard rock in Australia, that should support plans to increase production from 65,000 tons in 2018 to 175,000 tons in 2021. It is the second source of lithium in Australia for ALB in addition to ongoing projects in Nevada and Chile. Even despite the possible cost reduction of lithium, the production growth will increase the revenue of ALB.
AnalysisOn the weekly chart, a complete deep correction of ABC is seen after a fairly clear five-wave, which suggests a possibility of a new upward movement. The trend line in September 2015 confirms the continuing uptrend.
On the daily chart, the stochastic is in the oversold zone.
We recommend purchasing of ALB shares with a target price of $104 with medium terms of selling. The cancellation of the scenario will be the breaking through of a strong level $71 after which the price will return to the range of 2010 - 2016.
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