The interest in electric cars is continuously increasing. Even the coronavirus could not put a stop to this development. In the pandemic year 2020, global sales of electrically powered vehicles increased by 43%, bucking the general trend. In Norway last year, for the first time, more e-cars were registered than internal combustion vehicles - a world record.
In order for the electric cars to continue their triumphal march around the globe, sufficient lithium-ion batteries are needed. While the car companies and suppliers are building more and more of these so-called gigafactories, others have to ensure that sufficient raw materials are available. That, in turn, is the hobbyhorse of Albemarle. The world's largest lithium producer mines the light metal and supplies the industry with sufficient material. The element is the most important component of the much sought-after rechargeable batteries. Even if the automotive industry dominates demand for the extremely reactive metal, the power storage devices are also becoming increasingly popular in other areas such as private households. Lithium is also used in lubricants and air conditioning systems.
Lithium is mainly extracted from salt lakes such as those found in Chile, Argentina and the USA. In the state of Nevada, Albemarle operates the lithium production plant at Silver Peak. According to the company, this is the only lithium-producing plant in the United States. In order to meet the high demand, the US chemical company is currently investing in its production facility. Starting this year, it plans to invest USD 30m to USD 50m to double its current production by 2025. "This investment in domestic capacity demonstrates our commitment to exploring ways in which Silver Peak can support the growing EV market domestically," Albemarle president Eric Norris commented. Also playing into the hands of the world's largest lithium producer is the strategy of newly elected US President Joe Biden. He also wants to promote "electric vehicle" technologies in the fight against climate change.
Even though the future looks bright, Albemarle had to bake smaller rolls last year due to the global pandemic and the resulting reduced global economic activity. In the third quarter alone, earnings fell by almost 37%. For the full year, the company expects to post adjusted net income between $3.80 and $4.15 per share. That would represent a one-third reduction in the middle of the range compared to 2019. In terms of revenue, management expects USD 3.05 billion to USD 3.15 billion, compared with USD 3.6 billion on the books last year. The group will present its full-year results and a 2021 outlook on February 17. If analyst consensus is anything to go by, Albemarle will return to its long-term growth trajectory this year.
The stock market is already showing optimism: since the beginning of November 2020, the stock market value of the lithium specialist has almost doubled at its peak. After reaching a record high of USD 188.35, a consolidation set in. The stock is currently pausing in the USD 170 area. While the high on the upside limits the short-term price potential, there are numerous supports on the downside. The horizontal support zone between USD 130 and 150, as well as the 100-day line at USD 122, offer important holding areas.
The new Softcallable Barrier Reverse Convertibles give Albemarle shares even more downside room to run without jeopardizing a double-digit percentage return. The two products, which are offered in CHF and USD, each have a risk buffer of 41%. From today's perspective, this would mean that the price of the underlying could fall back to just below the USD 100 mark. If the S&P 500 member leaves the barrier intact during the maximum term of 15 months, the maximum yield will be achieved. The coupons amount to 12.5% p.a. and 13.6% p.a.. The Issuer has the right to call the Barrier Reverse Convertibles early after six months at the earliest.
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