Why BofA Bullish Is On Aluminum, Reinstating Buy Rating For Alcoa

Alcoa Corp AA aims to become first quartile in aluminum by 2024, while the sentiment is bullish for aluminum due to capped Chinese supply, potential risks on Russia’s supply and Europe facing supply headwinds due to high energy costs, according to BofA Securities.

The Alcoa Analyst: Lawson Winder reinstated coverage of Alcoa with a Buy rating and a price target of $89.

The Alcoa Thesis: A 10% increase in aluminum prices, which is what is expected in 2022, translates to 19% EBITDA growth and 18% free cash flow growth for the company, Winder said in the reinstation note.

“AA is an integrated producer with interests in bauxite mining and alumina refining that are more than sufficient to feed its aluminum smelters,” the analyst wrote. “With supply chains under pressure, we see vertical integration as a 'hidden' advantage,” he added.

“AA’s goal is to be a lower cost and lower carbon aluminum producer — we can see paths to achieving both,” Winder further mentioned.

AA Price Action: Shares of Alcoa are down 0.26% to $73.52 at the time of publication Wednesday morning.

Photo: rualuminas from Pixabay