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The bullish case for Alcoa Corp (NYSE:AA) can be made after a "key downside risk factor" has played out while restructuring efforts could soon show benefits, according to Credit Suisse.
The Analyst
Credit Suisse analyst Curt Woodworth upgraded Alcoa from Neutral to Outperform with a price target lifted from $26 to $27.
The Thesis
Alcoa has direct exposure to the price of aluminum, which Woodworth said has fallen from around $420/t in April to its current level of less than $300/t. After the sharp fall, the commodity is now poised to move back higher as Chinese refineries are cash negative and the country could implement cuts to their production.
Fundamentals in the aluminum market are "not that bad" and Woodworth said that could benefit from new demand in packaging, automotive and aerospace. Aluminum also has exposure to electric vehicles through battery boxes and lightweighting requirements. The metal is also less sensitive to housing and infrastructure trends unlike copper.
Meanwhile, multiple restructuring efforts including streamlining its organization structure could result in $60 million to $80 million in savings, the analyst wrote in the note. Other cost savings could come from the company's final exit in Spain and a restructured labor agreement in Canada.
Management is expected to quantify any financial benefits in its coming earnings report.
Price Action
Shares of Alcoa were trading higher by 2.8% at $21.44.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.
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