Alcoa Corp (NYSE: AA) is poised to benefit from its meaningful leverage to higher commodity prices, according to Goldman Sachs. The Alcoa Analyst: Emily Chieng upgraded the rating for Alcoa from Sell to Buy, while raising the price target from $19 to $32. The Alcoa Thesis: The Sell rating was based on the company’s weaker free cash flow generation relative to peers, and the higher costs associated with its aluminum assets versus its bauxite/alumina portfolio, Chieng said in the upgrade note. “However, with our commodities team’s upgrade of our aluminum price forecasts to $2,300/$2,500/$2,750 per tonne in 2021/2022/2023 (which are 15%/24%/39% above Bloomberg consensus), we believe these concerns are broadly alleviated and now expect deleveraging to accelerate,” he noted. “Additionally, we expect AA to benefit from higher seaborne alumina prices, and see the company’s assets screen attractively on the emissions intensity curve, particularly as the focus on low carbon intensifies,” the analyst wrote. Despite the rally in Alcoa’s shares since November, the stock has "lagged North American miners, with the shares up only 28% since the beginning of 2020, versus copper equities up ~140% and the S&P500 +20%,” Chieng said, while noting that Alcoa is a “beneficiary of the global reflation trade.” AA Price Action: Shares of Alcoa had risen by 9.71% to $30.16 Wednesday afternoon. (Photo: Alcoa plant in Mojøen, Norway, photo by Jarle Vines Jarvin via Wikimedia Commons) Latest Ratings for AA DateFirmActionFromTo Mar 2021Goldman SachsUpgradesSellBuy Jan 2021Morgan StanleyMaintainsEqual-Weight Dec 2020Morgan StanleyMaintainsEqual-Weight View More Analyst Ratings for AA View the Latest Analyst Ratings See more from BenzingaClick here for options trades from BenzingaRoku Is 'Redefining Video Monetization,' Analyst Says In Stock UpgradeBofA Upgrades Bank of Montreal, Downgrades Royal Bank of Canada© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Alcoa (NYSE: AA) stock moved higher in Wednesday morning trading -- up 6.2% as of 10:15 a.m. EST -- after investment banker Goldman Sachs pulled a complete 180, opinion-wise, on the aluminum metals giant. In an upgrade today, Goldman reversed its opinion from sell to buy, and added $13 to its price target on Alcoa shares, which it says should hit $32 within a year. Despite reporting negative earnings when calculated according to generally accepted accounting principles (GAAP) for two years running, Alcoa has generated positive free cash flow from its business in each of the past four years.
Alcoa broke out above a 26.30 cup entry but was there a better entry last week?