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Analysts Play Wait and Watch before Alcoa’s All-Important Split


Sep. 20 2016, Updated 6:04 p.m. ET

Analysts’ views

According to the consensus estimates compiled by Bloomberg, Alcoa (AA) carries a one-year price target of $11.29, which represents a 20.6% upside over its September 19 closing price.

Out of the 18 analysts polled by Bloomberg, only one rates the stock as a “sell” or equivalent. The remaining analysts are almost equally divided between the “buy” and “hold” camps.

Among other metals and mining companies (XME), Century Aluminum (CENX) is trading 24% below its consensus one-year price target. Rio Tinto (RIO) and Norsk Hydro (NHYDY) are trading at price levels similar to their respective consensus one-year price targets.

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The action so far

Wall Street analysts have mainly been sitting on the sidelines before Alcoa’s (AA) split. We did see some action from sell-side analysts after Alcoa’s earnings release. Some analysts downgraded Alcoa after the company reduced the long-term guidance for its Downstream segment during the company’s 1Q16 earnings call.

However, Alcoa was able to win back some of the analysts with its 2Q16 earnings. During the 2Q16 earnings conference call, Alcoa’s management worked to allay some fears relating to the aerospace slowdown.

Muted response by analysts

The graph above shows the recent analyst action for Alcoa. All of the analysts covering Alcoa have maintained their respective ratings and target prices in August and September.

On September 9, Seaport Global Securities initiated coverage on Alcoa with a “neutral” rating and a one-year price target of $14.

On September 2, Rosenblatt Securities also maintained its “buy” rating on Alcoa with a one-year price target of $15. This represents a 60% upside over the company’s current price levels.

Overall, the analyst community has offered a muted response with respect to Alcoa. While analysts seem to be playing it safe before Alcoa’s split, short-sellers have been eyeing the stock, as we’ll explore in the next part of this series.


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