AA - What's Hurting The Aluminum Market Should Be Good For Alcoa

2024-04-26 05:05:52 ET

Summary

• Despite the sharp sell-off since 2022 in Alcoa Corporation's stock price, I think the tide is now turning back in its favor, simultaneously hurting the overall aluminum market.
• The US and UK sanctions are already hitting Alcoa's competitor RUSAL hard and are opening up enormous opportunities for Alcoa to gain market share shortly.
• Rising aluminum prices due to the sanctions may reduce demand, particularly in Europe, but global demand remains relatively stable - good for Alcoa.
• The operational risks are quite high - as are the current multiples, such as EV/EBITDA. Alcoa's EBITDA should be well above consensus growth, which I am not yet convinced of.
• I have therefore decided to rate Alcoa as a "Hold" today.

My Thesis

The only time I have written about Alcoa Corporation ( AA ) was in April 2021 - my bullish thesis has aged poorly compared to the return of the S&P 500 Index ( SP500 ), even though a potential investor has had the chance to take a huge profit in AA over the last 2 years....

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