Albemarle is a decade-long bullish play: Josh Brown

Key Points
  • BMO: Albemarle has more than 15% upside from here
  • Shares have risen nearly 80% from their 52-week low in November 2016
  • Josh Brown thinks the company is the best pure play to invest in electric vehicle growth

Albemarle, the world's largest lithium producer, has tripled in value since 2015 but one Wall Street analyst doesn't see that run coming to an end any time soon.

Albemarle could see another 15% gain: BMO

BMO's Joel Jackson initiated coverage of the chemical-maker with an "outperform" rating, assigning a price target of $160 - a potential gain of over 15 percent from Wednesday's close.

Jackson sees Albemarle as one of the best ways to play, what he calls, the multi-decade theme of electric vehicles. "With electric vehicles… maintaining lithium exposure is prudent and Albemarle is a liquid, high-quality, diversified vehicle among scarce alternatives," Jackson wrote in a note published Tuesday.

Albemarle specializes in mining and refining lithium – a metal that is largely used for energy storage in batteries - and has garnered attention recently for its product's use in electric vehicles.

For 2017, Jackson expects that roughly half of Albemarle's earnings will be derived from lithium and the price of lithium is expected to increase in 2018. The note goes on to say producer margins should remain "exceptional for years."

Josh Brown of Ritholtz Wealth Management, an outspoken and long-time bull on the stock, thinks Albemarle is becoming a "decade-long play."

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"The market for electric vehicles is going to be explosive between now and 2025 and we just don't have enough lithium," Brown said on Wednesday's 'Halftime Report'. "You're seeing volumes increase, prices increase, and Albemarle is really the best pure play to get exposure to it as an investor."

Brown also believes Albemarle's non-lithium business segments provide investors an equal opportunity to benefit from growth in the global economy. The remaining 50% of Albemarle's 2017 earnings is expected to come from chemical catalysts for oil refiners and bromine.

But at 31 times next year's earnings, Steve Weiss of Short Hills Capital Partners thinks the stock might be getting a bit ahead of itself. "I wouldn't touch the valuation on it" he said. "I've got 20 times EBITDA for basically a specialty chemical producer, that's unheard of."

Pete Najarian took the other side on Albemarle's valuation, believing the company's "great margins, incredible growth and great free cash flow" make the forward earnings multiple easier to handle as an investor.

Jon Najarian believes another component in electrical vehicle batteries – graphite – is the real opportunity for investors.

"You own graphite because that's what is in the batteries," said Jon Najarian. "Lithium, to quote Elon Musk, is what you sprinkle over the top. So, if you want the bigger play, you go for graphite."

Despite his long-term bullish view, Josh Brown cautioned investors about getting completely caught up in the increasing hype around the company.

"Don't feel like you have to pile into it just because it was mentioned on TV. Do some research, there might be other plays to get involved with lithium but I do think it's the future."