On Tuesday, B.Riley updated its price target for Alcoa Corporation (NYSE:AA) shares, increasing it to $39.00 from the previous target of $31.00. The firm has maintained a Neutral rating on the stock.
The revision reflects the latest second-quarter data and the anticipation of higher long-term prices due to improved pricing in the London Metal Exchange (LME) and regional premiums.
The analyst from B.Riley highlighted that the adjustment in the price target is based on the actual performance of Alcoa in the second quarter to date. The estimated adjusted EBITDA for the quarter has been revised from $250 million to $277 million.
This change is attributed to a 14% rise in LME pricing, a 7% increase in Midwest premiums, and a 22% surge in European premiums. Additionally, alumina index prices saw a 17% quarter-over-quarter increase.
Alcoa's projected shipments for the quarter have not been altered. However, the analyst pointed out significant developments at the company, including the planned full curtailment of production at the Kwinana Alumina (OTC:AWCMY) Refinery in Western Australia starting in the second quarter of 2024. Alcoa has also communicated that it does not plan to seek external funding for its San Ciprian complex and has initiated the process for its potential sale.
The challenges faced by Alcoa at the San Ciprian complex were noted as a reinforcement of the broader thesis that global supply is being affected by power constraints.
Despite the positive adjustments to the price target, B.Riley's stance on Alcoa's stock remains Neutral, indicating a cautious outlook on the company's future performance despite the improved pricing environment.
In other recent news, Alcoa Corporation, a leading aluminum producer, has seen several significant developments. Morgan Stanley has upgraded Alcoa's stock from Equalweight to Overweight and raised the price target to $50.00, reflecting an expectation of Alcoa's ability to benefit from the current market dynamics affecting the aluminum industry. This upgrade is based on the disruptions in the global alumina supply, which have removed approximately 10% of the global supply excluding China.
Alcoa is also nearing the final stages of its acquisition of Alumina Limited, with completion expected around August 2024. This acquisition is seen as a value-enhancing transaction that will strengthen Alcoa's position in the aluminum industry.
In terms of financial performance, Alcoa reported flat revenues of $2.6 billion and a net loss of $252 million in its latest earnings call. Despite these figures, the company's cash balance rose to $1.4 billion, supported by a $750 million green bond issuance.
Citi has also increased Alcoa's stock price target to $50.00, maintaining a Buy rating, citing anticipated cost savings and the cyclical nature of Alcoa's earnings. These recent developments highlight Alcoa's strategic moves to strengthen its position in the market and the confidence expressed by financial analysts in the company's growth potential.
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