© Reuters. Morgan Stanley sees Alcoa (AA) shares facing downward pressure
Alcoa (NYSE:) was cut to Underweight from Equal Weight at Morgan Stanley on Thursday, with analysts lowering the firm’s price target on the stock to $33 from $43 per share.
The analysts explained that sluggish fundamentals will cap the recent rally for Americas metals and mining stocks. AA shares are down more than 5% at the time of writing.
“Mining equities may continue their recent move higher on sentiment around China stimulus for a bit longer, but we don’t think the rally is sustainable,” they wrote. “Weak global growth despite China’s services-led recovery, a stronger USD, and fair valuation will cap mining share performance.”
For Alcoa, the firm sees a material downside to consensus estimates.
“As negative earnings revisions materialize, we believe the stock will face downward pressure and underperform,” the analysts added.
“In 2Q23, our EBITDA estimate of $146m is ~22% below the consensus of $189m; in 2023, our $701m estimate is ~36% below the consensus of $1,092m; and in 2024 our $954m estimate is ~49% below the consensus of $1,897m. At 8.9x on our 2024e EBITDA, the stock is trading well above its historical average of 6.5x. In addition, the large negative revisions in our earnings estimates and PT are mainly due to the high operating leverage AA has to aluminum prices.”
Read the full article here
