Wolfe Research analysts downgraded Alcoa (NYSE:AA) shares to Underperform from Peer Perform with the price target of $25 per share, signaling a downside risk of nearly 27% relative to yesterday’s closing price.
The analysts expect “global surpluses to prevail” while aluminum markets are likely to be “challenging” over the next 12 months.
“Our more cautious 12-month view on aluminum prices reflects soft demand across end markets, rising output from Yunnan, China as drought conditions abate, and continued packaging destocking. In addition, AA's $55M/qtr added mining cost/inefficiencies in Australia could drag on beyond the current Q124E expectation,” they wrote in a downgrade note.
For Wolfe to grow more positive on Alcoa, they would like to see a more constructive outlook on aluminum prices, as well as a “quick resolution of Australia challenges.”
“In recent communication management has sounded hopeful of getting necessary government approvals to move its bauxite mines to a new area, removing ~$55M/qtr added mining costs/inefficiencies. However, any delay in resolving this could further push out this added cost beyond a current Q124E expectation.”
Alcoa shares are down 1.5% today.