After Earnings, Is Albemarle Stock a Buy, a Sell, or Fairly Valued?

Albemarle ALB released its fourth-quarter earnings report on Feb. 11. Here’s Morningstar’s take on Albemarle’s earnings and stock.

Key Morningstar Metrics for Albemarle

• Fair Value Estimate: $200.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High

What We Thought of Albemarle’s Q4 Earnings

Albemarle’s fourth-quarter earnings reflected improving sequential lithium prices as profits were up versus the third quarter. Albemarle shares were down 7% at the time of writing on Feb. 12, as part of a broader market selloff despite management’s outlook coming above FactSet consensus estimates.

Why it matters: Lithium prices are the largest driver of Albemarle’s profits, free cash flow, and stock price movement. Over the past several months, lithium prices have roughly doubled and are now just below our long-term price forecast of $20,000 per metric ton.

• For Albemarle, higher lithium prices should result in far-improved profits. We forecast energy storage (lithium sold to batteries) segment profits will roughly triple in 2026 versus 2025. This should also drive much-improved free cash flow generation for the company.

The bottom line: We maintain our $200 per share fair value estimate for narrow-moat Albemarle. At current prices, we view Albemarle as slightly undervalued, with shares trading around 20% below our fair value estimate but in 3-star territory as we maintain our Very High Uncertainty Rating.

• We raised our 2026 outlook due to higher lithium prices than we previously forecast. We also reduced our medium-term volume growth assumptions as we think Albemarle is likely to pursue slower growth going forward. The changes roughly offset, leading to no change to our fair value estimate.
• Lithium prices should remain volatile, but over the long term we forecast they will average around $20,000 per metric ton. This is in line with our forecast for the long-term marginal cost of production.

Fair Value Estimate for Albemarle

With its 3-star rating, we believe Albemarle’s stock is fairly valued compared with our long-term fair value estimate of $200 per share. We assume roughly a 10% weighted average cost of capital. We use a multiple of 11.5 times midcycle EBITDA to value free cash flows generated beyond our 10-year explicit forecast horizon.

Lithium will remain Albemarle’s largest business. Lithium carbonate spot prices, which tend to be a leading indicator of contract prices, are currently around $18,000 per metric ton (based on published indexes), up from $8,000 in mid-2025. Prices rose due to demand growing faster than supply over 2025. As demand growth remains strong and global supply growth slows, we expect the market to remain closer to balance in 2026.

Read more about Albemarle’s fair value estimate.

Economic Moat Rating

We award a narrow economic moat rating to Albemarle for the company’s strong and durable cost advantage in lithium and bromine production. Globally, lithium carbonate is produced from either lower-cost evaporation of brine or higher-cost mining of spodumene minerals. Albemarle has a cost advantage in lithium carbonate production due to its lucrative brine assets in the Salar de Atacama in Chile, which produce lithium at the lowest cost globally, excluding royalties.

Read more about Albemarle’s economic moat.

Financial Strength

Albemarle is in decent financial health. As of Dec. 31, management reported net debt/adjusted EBITDA was 2 times, within management’s long-term target of less than 2.5. We expect adjusted EBITDA will rise in the coming quarters due to higher lithium prices. In 2025, despite cyclically low lithium prices, Albemarle generated positive free cash flow exceeding dividends. As EBITDA and free cash flow grow, we think the company will also paydown debt.

Following low lithium prices in 2025, Albemarle plans to keep capital expenditures low in 2026. Due to high prices and Albemarle’s cost reduction initiatives, we expect EBITDA will rise in 2026. Additionally, Albemarle will divest a 51% stake in Ketjen, its catalysts business, to KPS for $660 million before taxes and fees, in a deal that should close in 2026. These funds should support the balance sheet.

Albemarle has raised its dividend each year since 1995. However, should lithium prices remain lower for longer, the company may be forced to cut its dividend as a way to direct more cash flow toward debt reduction.

Read more about Albemarle’s financial strength.

Risk and Uncertainty

We assign Albemarle a Very High Uncertainty Rating. The biggest risk for Albemarle is volatile lithium prices. Prices could decline if demand grows more slowly than expected due to slowing EV sales growth. Also, new batteries, such as sodium-ion, could overtake lithium as the preferred energy storage resource.

Lithium production could ramp up more quickly than demand growth if producers bring too much supply to the market. Prices could also fall and remain lower for longer if major battery producers or Chinese state-owned enterprises continue to invest in higher-cost lithium resources to keep the lithium market oversupplied. New lithium production technologies could also alter the cost curve, such as direct lithium extraction. Albemarle faces execution risk in ramping up its new lithium projects, including production delays and cost overruns. Albemarle is also subject to political risk in Chile. President Gabriel Boric wants the Chilean government to own a majority stake in all projects. If this occurs, Albemarle could be forced to trade a 50.1% stake to the Chilean government to extend its lease when it expires in 2043.

The largest ESG risks come from potential new regulations. Regulations could limit emissions in the bromine business, and the company may not be able to pass along the cost increases. We see this as having a moderate probability and materiality.

Read more about Albemarle’s risk and uncertainty.

ALB Bulls Say

• Albemarle has top-tier lithium assets through its brine operations in Chile and spodumene hard-rock operations in Western Australia, which are among the lowest-cost sources of lithium production globally.
• Lithium prices will rebound then remain well above the marginal cost of production through at least the remainder of the decade, leading to excess profits and return on invested capital for Albemarle.
• Albemarle has low-cost bromine production through its highly concentrated brines in the Dead Sea and Arkansas.

ALB Bears Say

• Lithium prices will fall and remain lower for longer as new supply growth will outpace demand, weighing on profitability.
• Albemarle’s investment in higher-cost lithium resources, including Wogdina and King’s Mountain, will prove value-destructive as they will not generate returns above its weighted average cost of capital.
• Chile’s plan to nationalize lithium could result in Albemarle being forced to trade a majority stake to the government to renew its lease, destroying shareholder value.

This article was compiled by Rachel Schlueter.