Recently, Jefferies made the decision to upgrade U.S. shares of SQM, a Latin American lithium producer, from hold to buy. This upgrade came from analyst Alejandro Demichelis, who also raised the price target significantly. With a new price target of $62.80, there is now an upside of 31.9% for investors looking at SQM.

Despite some uncertainties in the market regarding a Chilean lithium concession deal, Demichelis believes that SQM is an undervalued asset. The market, according to the analyst, is not fully appreciating the low-cash cost advantage that SQM holds in the lithium space. Additionally, with the company’s increasing international presence, there is potential for greater growth that is not currently being factored into the market valuation.

Long-Term Perspective

Looking at the performance of SQM compared to its peer Albemarle since the beginning of the year, there may be some hesitation from investors. However, Demichelis sees a brighter future for SQM in the long term. While there are no immediate changes to near-term earnings expected from the company’s restructuring, the potential value that could be created by the Chilean lithium concession extension to 2060 is significant.

According to Demichelis, the upcoming changes and reshaping within SQM are positioning the company for a much stronger competitive future. While the stock has not followed the market trend in 2024, dropping 16% year to date, the analyst remains optimistic about the potential for SQM to outperform its competitors in the commodities space.

Despite some short-term challenges and uncertainties, Jefferies’ upgrade of SQM to a buy rating reflects a belief in the long-term value and potential growth of the company. With a focus on the reshaping that SQM is undergoing and the benefits that can come from international expansion and strategic deals, analysts like Demichelis see an attractive opportunity for investors in the commodities space.

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