Alcoa Corp (NYSE: AA) down about 45% versus its record high last year is an opportunity to buy a quality name at a deep discount, says Alexander Hacking – Equity Research Analyst at Citigroup.
Alcoa stock should be worth $65
Hacking upgraded the aluminum producer this morning to “buy” and raised his price objective to $65 a share that suggests a 35% upside from here.
The Citi analyst expects Alcoa Corp to significantly benefit as China continues to abandon its rather stringent COVID policies.
Aluminum tends to arrive late to bull market parties, is relatively lightly positioned, and has a myriad of idiosyncratic upside risks as well as being exposed to macroeconomic and El Nino-related supply-side risks.
He’s constructive on Alcoa stock even though the Pittsburgh-headquartered firm reported weaker-than-expected revenue for its fourth financial quarter in January.
What else could boost Alcoa stock?
Hacking pointed to copper and coal that are already benefitting from China reopening and said Alcoa Corp will likely be the next in line.
The Citi analyst is bullish as the macro outlook is turning more positive for this industrial stock and yet it remains out of favour to date. In his research note today, he added:
Alcoa has low debt, strong liquidity, and low-cost upstream assets. Rolling smelter cuts from southwestern China restrict supply response to margins. Citi is long-term bullish on outlook for aluminum – the next leg of China reopening trade.
Earlier this month, a Bloomberg report said that the U.S. was considering a 200% tariff on Russian aluminum. If imposed, that would be a meaningful catalyst for the Alcoa stock as well.