Bank of America Securities analyst Isabella Simonato maintained a Sell rating on Sociedad Quimica Y Minera SA yesterday and set a price target of $36.50.
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Isabella Simonato’s rating is based on the assessment that while Sociedad Quimica Y Minera SA (SQM) might experience short-term benefits from rising lithium prices, the long-term outlook presents significant risks. The suspension of the CATL mine in China has led to a temporary spike in lithium prices, which could positively impact SQM’s earnings in the near term. However, Simonato maintains a cautious stance due to the company’s long-term fundamentals and strategic changes.
Simonato points out that SQM’s future is tied to its expansion plans and a deal with Codelco, which will reduce its stake in the lithium business to 50% by 2031. The current rally in lithium prices does not alter the long-term supply and demand dynamics, and Simonato’s discounted cash flow model suggests limited upside potential for SQM’s stock. The price objective of $36.50 reflects these considerations, indicating that the stock is currently overvalued at its trading price of $45.76.