Alcoa More Solid on Upgrades

Alcoa (NYSE:AA) shares climbed Wednesday after Citi upgraded Alcoa to buy from neutral, citing optimism around China’s economic reopening.

Citi sees aluminum as the next leg of the China’s reopening trade following iron ore and copper, and says aluminum “tends to arrive late to bull market parties, is relatively light positioned, and has a myriad of idiosyncratic upside risks as well as being exposed to macroeconomic- and ElNino-related supply side risks.”

Citi analyst Alexander Hacking acknowledged Alcoa’s limited free cash flow, but he expects the stock will outperform “as the default North America exposure to aluminum.”

Alcoa shares are fairly valued given the high risks of a recession, but likely will fly higher as soon as demand expectations improve, wrote one expert.

Meanwhile, the company’s Australian arm has terminated a joint development project with FYI Resources Ltd (ASX: FYI) for high-purity alumina (HPA).

Alcoa announced in 2021 that Alcoa of Australia (AoA) had executed a binding term sheet with Western Australia-based FYI Resources for development activities to produce HPA, which is used to manufacture materials such as synthetic sapphires used in LED lighting and other various applications.

The project had three phases, and AoA contributed approximately $5 million (USD) for stage one development activities. With the termination of the joint development project, the final two stages will not progress.
AA gained $2.26, or 4.7%, to $50.33.

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