Lithium prices “chill” resurfaced, and Xiaomo lowered America's Yabao (ALB.US) profit forecast and target price to 140 US dollars

The Zhitong Finance App learned that due to the continued weakening of lithium prices, J.P. Morgan Chase drastically lowered the profit forecast and target price of global lithium giant Alb.US (ALB.US). Affected by this, America's stock price closed down 5.89% on Tuesday, becoming one of the worst performing constituent stocks of the S&P 500 index on the same day.

J.P. Morgan analyst Jeffrey Zekauskas (Jeffrey Zekauskas) maintained a “neutral” rating for America's Abbott in a report, but lowered the stock's target price from $160 to $140. The bank said it lowered America's 2026 adjusted profit before interest, tax, depreciation and amortization (EBITDA) forecast from US$3.37 billion to US$2.88 billion, a decrease of 14.4%; the adjusted EBITDA forecast for 2027 was lowered from US$3.59 billion to US$2.93 billion, a decrease of 18.4%.

The adjusted earnings per share forecast was lowered at the same time. The 2026 adjusted earnings per share forecast fell to $12.05 from the previous $14.20; the 2027 forecast fell from $15.35 to $11.65.

The bank pointed out that the above adjustments mainly reflect the weakening outlook for lithium prices. According to the data, the average price of lithium carbonate in China was 24,810 US dollars per ton in the second quarter, but the average price has fallen back to about 21,625 US dollars so far in the third quarter. J.P. Morgan currently expects lithium prices to remain in the low range of around $20 per kilogram, while the previous model assumed a mid-range level of $20 per kilogram.

J.P. Morgan believes that changes in lithium prices are extremely sensitive to the profits of Abbott in the US. The bank estimates that the price of lithium changes by 1 US dollar per kilogram, and Abo's annual EBITDA will change accordingly by about 250 million US dollars. This means that the hypothetical change in lithium prices from mid-$20 to early $20 per kilogram is sufficient to explain the multi-billion dollar decline in long-term EBITDA forecasts.

J.P. Morgan also estimates that the US Abbott adjusted EBITDA for the third quarter will be US$668 million, down from US$858 million in the second quarter, but significantly higher than US$226 million in the same period last year. The bank also expects that sales of lithium products will decline month-on-month in the third quarter, and that the product structure will also weaken.

Furthermore, America's Yabo Greenwich CGP3 plant in Australia still faced delays after a fire broke out in June. The plant restarted on August 1, but J.P. Morgan expects production to resume at full capacity until the end of the first quarter of 2027.

From a longer-term perspective, America's Abbott still benefits from the strong demand for lithium brought about by the construction of electric vehicles and energy storage systems. The company's investment in technology is expected to help it increase the efficiency and scale of lithium production. However, its profitability is still highly dependent on fluctuating lithium prices, and operational issues at key production sites may continue to disrupt profits and profit margins.

J.P. Morgan believes that the current stock price of Abbott in the US is close to its target price, and the valuation is at a reasonable level for a high-quality but volatile lithium producer.