Albemarle (ALB – Research Report), the Basic Materials sector company, was revisited by a Wall Street analyst yesterday. Analyst Joel Jackson from BMO Capital maintained a Buy rating on the stock and has a $180.00 price target.
Joel Jackson has given his Buy rating due to a combination of factors pertaining to Albemarle’s strategic financial maneuvering and growth prospects. Jackson highlights that the issuance of approximately $1.75 billion in mandatory convertible preference shares will strengthen Albemarle’s balance sheet by providing necessary funds to complete lithium growth projects. This move signals management’s confidence in the future appreciation of the company’s stock value, as the eventual equity dilution is expected to be less than a one-to-one ratio, assuming the stock price increases as anticipated.
Furthermore, Jackson notes the offering’s structure will be immediately treated as equity, halving the net debt to around $1.55 billion and significantly reducing the leverage ratio by the end of 2024. This positions Albemarle favorably within its covenant thresholds. Additionally, the offering’s appeal to a broader investor base, including those interested in yield and convertible arbitrage opportunities, due to its comparatively high coupon rate of 7.25%, bolsters the rationale behind the Buy rating. The potential increase in share count, which is estimated to be manageable, also factors into the positive outlook, contingent on the company’s share price performing well and justifying the coupon payments until the conversion.
In another report released yesterday, Loop Capital Markets also maintained a Buy rating on the stock with a $168.00 price target.
ALB’s price has also changed moderately for the past six months – from $200.260 to $133.200, which is a -33.49% drop .
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Albemarle (ALB) Company Description:
Albemarle Corp. is a specialty company, which engages in developing, manufacturing, and marketing of chemicals for consumer electronics, petroleum refining, utilities, packaging, construction, transportation, pharmaceuticals, crop production, food-safety, and custom chemistry services. It operates through the following segments: Lithium, Bromine Specialties, and Catalysts. The Lithium segment engages in developing and manufacture of basic lithium compounds, including lithium carbonate, lithium hydroxide, lithium chloride, and value-added lithium specialties and reagents. The Bromine Specialties segment consists of bromine and bromine-based business includes products used in fire safety solutions and other specialty chemicals applications. The Catalysts segment contain two product lines: clean fuels technologies, which is primarily composed of hydro processing catalysts, and heavy oil upgrading that comprises of fluidized catalytic cracking catalysts and additives. The company was founded in 1993 and is headquartered in Charlotte, NC.
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