Goldman Sachs reiterated a Buy rating on Alcoa (NYSE: AA) with a price target of $17. Comments follow Q2 results.

Analyst Sal Tharani said, "We believe the market is not recognizing that a positive feature of Alcoa’s strategy to grow its downstream business (particularly aerospace) is the resulting transition into a multi-material company with a nickel super alloy portfolio as large as CRS (Neutral) and a titanium portfolio as big as ATI and RTI (both Neutral) combined, by our estimate. We estimate that the proposed Firth Rixson acquisition would grow AA’s high margin nonaluminum portfolio. Another positive driver, not fully appreciated by the market in our view, is the potential revenue from selling its unutilized power, a consequence of closures of high cost smelters around the world. These power sales added $28mn sequentially to its bottom line in 2Q."

"We believe that there is lot to appreciate about Alcoa including: (1) its transition into a high margin downstream-focused industrial company; (2) rationalization and restructuring of the upstream business; (3) a growing multi-material portfolio, (4) expected decade-long exponential growth in aluminum BiW where Alcoa would be a leading participant; (4) culture of innovation allowing it to bring new products and solutions to the market," he added.

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Shares of Alcoa closed at $14.85 yesterday.