On Tuesday, Jefferies updated its financial outlook on Sociedad Quimica y Minera (NYSE:SQM), raising the price target from $50.00 to $55.00 and maintaining a Buy rating. The adjustment follows recent developments in the company’s joint venture with Codelco and broader market conditions. According to InvestingPro data, SQM appears undervalued at current levels, with analysts setting price targets ranging from $35 to $80. The company has demonstrated strong momentum with an 18.67% YTD return.
Alejandro Demichelis, an analyst at Jefferies, noted that the chairman of Codelco, a Chilean state-owned mining company, has confirmed that all necessary regulatory inquiries concerning the Salar de Atacama lithium joint venture with SQM have been addressed. The deal is anticipated to be finalized by September 2025. This joint venture is significant for SQM as it could contribute to the value of the Atacama concession extension. InvestingPro analysis shows the company maintains a strong financial position with a current ratio of 2.51, indicating ample liquidity to support its strategic initiatives.
Demichelis pointed out that the stabilization of the lithium market, along with the upcoming presidential elections in Chile, are crucial factors in reducing uncertainties surrounding SQM. These events are expected to positively influence the company’s stock in the near term.
In light of SQM’s fourth-quarter 2024 results and updates to lithium price markets, Jefferies has revised its EBITDA estimates for SQM from 2025 to 2027. While expressing caution about the overall lithium market, the firm’s Buy rating for SQM is based on two main pillars: the potential value increase from the Atacama concession extension and the attractive valuation of SQM’s stock. Currently, SQM is trading at approximately 11 times its projected 2025 EV/EBITDA, which represents a roughly 20% discount compared to its peer, Albemarle Corporation (NYSE:ALB), which also holds a Buy rating. Notable strengths highlighted by InvestingPro include the company’s 31-year track record of consistent dividend payments and moderate debt levels, with analysts forecasting profitability for the upcoming year. For detailed analysis and additional insights, investors can access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Sociedad Quimica y Minera (SQM) announced its fourth-quarter earnings for 2024, which did not meet expectations. The company reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of $318 million, falling 5% short of estimates from BofA Securities and Visible Alpha, and marking a 23% decline compared to the previous year. Despite revenues reaching $1.07 billion, which was 10% higher than BofA’s forecasts due to strong lithium and potash volumes, the company’s performance was hampered by narrower gross margins and increased expenses. SQM’s earnings per share (EPS) for the quarter were $0.42, significantly lower than anticipated, falling 36% below BofA’s projection and 26% below the consensus.
BofA Securities responded by reducing SQM’s stock price target to $37 while maintaining an Underperform rating. Meanwhile, Citi adjusted its price target for SQM to $54 from $60 but maintained a Buy rating, indicating continued confidence in the company’s prospects. Citi’s analysis projects a significant year-over-year decrease of 55% in SQM’s EBITDA for 2024, although they revised their fourth-quarter estimates for lithium volume sales upward. Looking ahead, Citi forecasts a 24% increase in EBITDA for 2025, with expectations of robust global lithium demand growth. The firm also highlighted that SQM’s net financial debt to EBITDA ratio was slightly above the company’s preferred threshold, yet it still views the company’s financial position favorably.
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