Why This Alcoa Analyst Is Turning Bullish In An Uncertain Macro Environment

Alcoa Corp AA is poised to generate strong free cash flow in the years to come, given the constructive outlook for aluminum, according to Morgan Stanley.

Alcoa analyst: Carlos De Alba upgraded Alcoa's rating from Equal Weight to Overweight and raised the price target from $51 to $66.

Alcoa takeaways: While the company's results may remain under pressure in the second half of 2022, primarily due to lower commodity prices and of rising costs, "we think the market will see through these near-term events." headwinds, De Alba said in the upgrade note.

See other analysts' notes.

Spot aluminum prices are at a level that has "historically provided a floor", and relative to other commodities, "aluminum is enjoying better cost curve support and prices should be well supported at this level,” the analyst said.

Structural changes in China could also support aluminum prices, De Alba mentioned.

"If electricity shortages in China become a persistent problem, it could put additional pressure on the Chinese pig iron industry to reduce production, which our opinion, will reduce aluminum exports out of China,” he explained.< /p>

AA Price Action: Alcoa shares were down 2.94% Friday afternoon at $41.88.

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