On Friday, Mizuho Securities adjusted its outlook on Arcadium Lithium PLC (NYSE:ALTM), reducing the stock's price target to $3.00 from the previous $3.50, while maintaining a Neutral rating. This change reflects a revised forecast for the lithium market and the company's financial projections.
Arcadium Lithium's inaugural investor day unveiled projections that see the company's net debt-to-EBITDA ratio climbing to 2.1x, despite anticipating negative cash flow through 2026. The lithium market is expected to remain in oversupply until 2026, with a potential shortfall emerging in 2027. Despite these challenges, ALTM is aiming to increase its volume by nearly 20% compound annual growth rate (CAGR) from 2024 to 2028 without the need for equity dilution.
The price target adjustment was driven by lowered expectations for near-term plus one year (NTM+1) EBITDA, which is now anticipated to be $510 million, down from the previous estimate of $800 million. This reduction is largely due to lower expected lithium pricing and the halt in production at the Mt. Cattlin mine.
Partially offsetting these negative factors, Mizuho has increased the target enterprise value to EBITDA (EV/EBITDA) multiple for Arcadium Lithium to 8.5x, up from 5x. This adjustment is based on growing confidence in the company's balance sheet and the recognition of a cyclically inverse relationship between valuation multiples and earnings. Specifically, the firm expects that multiples will be higher during earnings troughs and lower during peaks.
In other recent news, Arcadium Lithium has seen a series of adjustments by various analysts. Mizuho Securities reduced its price target for Arcadium Lithium to $3.00, maintaining a neutral rating. This adjustment came following Arcadium Lithium's first investor day, where the company revealed financial expectations and market projections. The company plans to grow its volume at a compound annual growth rate of nearly 20% from 2024 through 2028 without resorting to equity dilution.
Evercore ISI maintained an Outperform rating on Arcadium Lithium, keeping a steady price target of $9.00. TD Cowen also reaffirmed its Buy rating on the company, applauding its strategic plans and financial performance. Meanwhile, BMO Capital Markets maintained a Market Perform rating on the company, expressing caution about the company's ambitious plans to potentially quadruple its production volume over the next decade.
UBS initiated coverage on Arcadium Lithium with a Neutral rating, reflecting a cautious approach towards the company's near-term prospects due to market oversupply and lower lithium prices. Piper Sandler maintained its underweight rating on Arcadium Lithium, citing concerns over the global lithium supply and demand balance. KeyBanc Capital Markets adjusted its outlook on Arcadium Lithium, reducing the price target to $8 from the previous $9 while maintaining an Overweight rating.
InvestingPro Insights
In light of Mizuho Securities’ recent reevaluation of Arcadium Lithium PLC (NYSE:ALTM), incorporating real-time data from InvestingPro can provide investors with additional context. The company's market capitalization stands at $3.02 billion, reflecting the scale of its operations within the lithium sector. Despite the current challenges, Arcadium Lithium has shown a significant return over the last week, with a 12.35% increase in its stock price, suggesting a potential rebound or market reaction to recent developments.
InvestingPro Tips indicate that while Arcadium Lithium is quickly burning through cash, its liquid assets still exceed short-term obligations, showcasing a degree of financial resilience. Moreover, analysts predict that the company will be profitable this year, which aligns with the company's own projections for increased volume growth. However, the stock has experienced considerable volatility, with a 60.3% decline over the last year, emphasizing the risk factors involved.
For those interested in a deeper analysis, InvestingPro offers additional tips on Arcadium Lithium, which can be found at https://www.investing.com/pro/ALTM. With these insights, investors can better navigate the complexities of the lithium market and Arcadium Lithium's position within it.
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