CSTM - Alcoa cut at J.P. Morgan on weaker aluminum fundamentals

2023-07-14 07:45:43 ET

Alcoa ( NYSE: AA ) -2.4% pre-market Friday as J.P. Morgan downgrades the stock to Neutral from Overweight with a $36 price target, cut from $54, citing weaker near-term aluminum fundamentals including planned capacity restarts in China while primary demand remains subdued.

JPM's Bill Peterson also is cautious over the timing of permitting extensions for Alcoa's ( AA ) mining operations in Western Australia, with no clear line of sight on a resolution as the company faces a more stringent permitting process and continued pushback from local activists.

An agreement ultimately should be met, as evidenced by Alcoa's ( AA ) commitment to supply Emirates Global Aluminum with up to 15.6M tons of alumina over an eight-year agreement, but Peterson sees any delayed resolution as an overhang on the shares.

Peterson said his preferred stock in the aluminum sector is Overweight-rated Constellium ( CSTM ), which trades at a discount to peers and likely will emerge as a capital returns story in 2024.

More on Alcoa:

• Financial and valuation comparison to sector peers
• Analysis: Alcoa: Exploring The Mystery Of High Tax Rates
• Stock price return:Down 17.5% YTD, down 15% in the past 12 months

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