In this series, we’ve looked at the different factors that could impact Alcoa (AA) and aluminum producers in 2018. As things stand today, the aluminum market’s sentiments look reasonably strong. Aluminum could show strength in 2018 unless there’s a demand or supply-side shocker from China. Any trade protection from the Trump Administration could support US aluminum premiums in 2018. In this part, we’ll see how analysts rate Alcoa as we head into 2018.
Alcoa has received a consensus target price of $56 from analysts polled by Thomson Reuters on December 19. Based on the closing prices, it represents a potential upside of 20.4%. Norsk Hydro’s (NHY) target price implies a potential upside of 8.3%. South32 (S32) and Century Aluminum (CENX) are trading 5.0% and 6.7%, respectively, above their consensus target prices.
Overall, analysts are bullish on Alcoa. The stock has received a “strong buy” rating from three analysts, while seven analysts rated the stock as a “buy.” The remaining four analysts polled by Thomson Reuters on December 19 gave Alcoa a “hold” or some equivalent rating.
Alcoa is valued at an EV-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) of 4.51x its 2018 expected EBITDA. The valuation multiples don’t look high given Alcoa’s historical multiples. Favorable aluminum market conditions (XLB) and a reasonable valuation could support Alcoa in 2018.
Visit Market Realist’s Aluminum page for ongoing updates on the industry.