Analysts see long-term value in Alcoa’s acquisition despite short-term leverage concerns and weak alumina markets.
B. Riley reiterated a Buy rating on Alcoa Corp (AA) with a $92 price target following its acquisition of South32’s bauxite, alumina, and aluminum assets. The firm acknowledged investor concerns over increased leverage and weak alumina prices but called the selloff excessive, citing potential cost synergies and improved competitiveness over time.
Earlier, Wells Fargo cut its price target on Alcoa from $82 to $71 while maintaining an Overweight rating, citing aluminum price weakness. Despite the downgrade, analysts view the pullback as overdone, with aluminum prices retreating to pre-Iran War levels despite physical market damage.
Alcoa’s deal is expected to strengthen its scale and cash flow, with asset sales and higher metal prices potentially offsetting additional debt. The firm operates across bauxite mining, alumina refining, and aluminum production.