The analysts explained they have lowered the rating on the stocks based on challenges in EV manufacturing and demand, "which may conspire to significantly degrade lithium’s S/D dynamics."
Piper Sandler also lowered the price target for LTHM to $19 from $33 and ALB to $155 from $255 per share.
"We are also re-evaluating the appropriate valuation multiples for lithium-based shares in light of an updated long-term outlook for the industry, its growth environment and the likely endgame for lithium as a product," the analysts explained.
"We believe widespread downstream issues for the product owing to slowing EV demand growth driven by macroeconomic factors and product issues within the OEMs and a relatively faster rate of lithium supply growth will take the lithium market to a balanced to long situation vs. estimates of a decidedly short situation as recently as 6 months ago," they added.
As a result of the issues, Piper Sandler believes lithium prices may remain under pressure, and earnings growth may suffer.
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