JPMorgan Upgrades Alcoa (AA) to Neutral

JPMorgan analyst Bill Peterson upgraded Alcoa (NYSE: AA) from Underweight to Neutral with a price target of $68.00 (from $50.00).

The analyst comments: "Since the conflict in Iran began last month, aluminum has rallied +12% (vs. BCOMIN +2%) on regional supply risk, accounting for nearly 20% of ex-China demand via net exports. Any prolonged conflict is likely to result in additional force majeure declarations followed by smelter curtailments, which could take at least quarters to re-ramp. This supply risk, which could soon become protracted once alumina inventories are depleted, has JPM’s Commodities Research team warning pricing could run towards $4,000/t (link). As such, we upgrade Alcoa to Neutral with a new $68 Dec-26 PT using the latest forward strip. Earlier this year, we downgraded shares to UW on forthcoming supply additions and rich valuation, and while shares were generally flat-to-down in the weeks following, they’ve risen 6% (vs. XME -5%) since the conflict started. Dynamics have changed, and with every day the conflict extends, so does the risk of a prolonged supply disruption supporting elevated pricing, which we feel offers a more balanced near-term risk/reward backdrop. However, our Neutral rating also reflects downside risks from elevated energy costs, pressured alumina pricing, potential demand destruction and/or a •broader macro-economic downturn."

For an analyst ratings summary and ratings history on Alcoa click here. For more ratings news on Alcoa click here.

Shares of Alcoa closed at $65.93 yesterday.

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