Despite being sold off earlier this year, Jefferies remains optimistic about the prospects of SQM in the commodities sector. Analyst Alejandro Demichelis recently upgraded U.S. shares of the Latin American lithium producer, changing the rating from hold to buy. With a price target increase of $10.80 to $62.80, Demichelis now sees a potential upside of 31.9% for investors.
Demichelis highlighted the overlooked value in SQM due to the company’s restructuring efforts. He pointed out that the market fails to fully appreciate SQM’s cost advantage in the lithium space. Additionally, the expanding international presence of the business could lead to growth opportunities that are not yet factored into market expectations.
While SQM has performed similarly to its peer Albemarle since the beginning of the year, there have been concerns regarding uncertainties surrounding a Chilean lithium concession extension. Despite the lack of a definitive agreement, Demichelis believes that once executed, the plan could create substantial value for the company. These strategic moves may not immediately impact the company’s earnings, but they could position SQM for stronger competitiveness in the future.
Following the upgrade from Jefferies, SQM shares saw a more than 6% increase during Monday morning trading. This positive momentum is somewhat unexpected, given that the stock has underperformed the market this year, dropping nearly 16% year-to-date.
Final Thoughts
While there are uncertainties and challenges ahead for SQM, the overarching sentiment from Jefferies is one of cautious optimism. The company’s ongoing restructuring efforts and international expansion initiatives could pave the way for long-term growth and value creation. Investors may want to reassess their views on SQM and consider the potential upside that could come from these strategic moves.