Date: Mon Aug 18 2025 Prepared by: Investment Master Team (using fundamental, technical, macro & smart‑money agents)
| Item | View |
|---|---|
| Current price | $31.27 (15 Aug 2025 close) |
| Market‑cap | $8.10 B |
| Forward P/E | 9.8× (vs. industry ~10.4×) |
| Dividend yield | 1.28 % |
| Target price (our model) | $35.00 (≈ 12 % upside) |
| Suggested entry | $30.50 ± $0.20 |
| Stop‑loss | $29.50 (just below key Fibonacci support) |
| Risk rating | Medium‑High (mainly commodity‑price & tariff risk) |
| Recommendation | Neutral‑to‑Slight‑Bullish – worth a modest, risk‑controlled position. |
Back‑testing order already placed (see Section 9).
| Metric (FY‑2024) | Value | Comment |
|---|---|---|
| Revenue | $12.78 B | +4 % YoY (driven by higher aluminum prices) |
| Net Income | $989 M | Recovery from 2023 loss, still below 2021 peak |
| EBITDA | $1.31 B | EBITDA margin ≈ 10 % |
| Operating margin | 4.41 % | Down from 6.1 % in 2022 (energy‑cost pressure) |
| ROE | 17.15 % | Strong relative to peers (~10‑12 %) |
| ROA | 7.94 % | Reasonable for a capital‑intensive miner |
| Item | FY‑2024 | Significance |
|---|---|---|
| Operating cash flow | $622 M | Positive, shows core business health |
| Free cash flow | $42 M | Small but positive after $580 M cap‑ex |
| Cash & cash equivalents | $1.51 B | Comfortable liquidity cushion |
| Total debt | $2.8 B | Moderate; 42.6 % Debt/Equity |
| Interest expense | $132 M | Coverage (EBIT/Interest) ≈ 5× – adequate but not abundant |
| Debt maturities | $0.9 B due 2026‑27 (see Chart 2) | Near‑term refinancing risk |
| Indicator | Value | Interpretation |
|---|---|---|
| Current price | $31.27 | Near 52‑week low ($21.53) but above recent support |
| 52‑wk range | $21.53 – $47.77 | Trading ~ 65 % of the way up the range |
| 7‑day SMA | $30.71 | Slightly above 30‑day SMA – mild short‑term bullish bias |
| 30‑day SMA | $30.28 | Flat |
| 200‑day SMA | $33.11 | Below price, indicating long‑term bearish bias |
| RSI (14) | 56.8 | Neutral (neither overbought nor oversold) |
| Stochastic %K / %D | 88 / 85 | Overbought – possible short‑term pull‑back |
| MACD | +0.34 (histogram negative) | Downward momentum |
| ADX | 10.7 | Weak trend – market indecision |
| OBV | Declining | Net selling pressure |
| Level | Price | Role |
|---|---|---|
| 0 % (Resistance) | $31.75 | Recent swing‑high |
| 23.6 % | $30.96 | Primary support |
| 38.2 % | $30.47 | Secondary support |
| 50 % | $30.08 | Mid‑range support |
| 61.8 % | $29.68 | Lower‑range support |
| 100 % | $28.40 | Long‑term support (previous low) |
| Pattern | Date | Implication |
|---|---|---|
| Hammer | 2025‑07‑11 | Bullish reversal potential |
| Evening Star | 2025‑06‑25 | Bearish reversal signal |
| Engulfing (bullish) | 2025‑06‑17 | Short‑term upside |
| Doji (frequent) | 2025‑08‑13 | Market indecision |
| Factor | Current State (2025) | Outlook (2025‑2027) | Impact on AA |
|---|---|---|---|
| Aluminum demand | Global demand ~ 65 Mt, driven by EVs, aerospace, packaging. | CAGR ≈ 2‑3 % – steady growth, especially in China’s “green‑metal” push. | Positive demand tail‑wind. |
| Aluminum supply | Capacity ~ 68 Mt, excess ~ 3 Mt, but new capacity (e.g., Rio Tinto‑Alcoa joint plant) may add 1‑2 Mt by 2027. | Slightly tighter supply if new projects delayed. | Potential for price support. |
| U.S. Section‑232 tariffs | Investigation ongoing; no duty yet. | Analysts assign ~30 % probability of 10 % import duty by 2026. | Could compress margins if imposed. |
| Carbon‑price policies | No US federal carbon tax yet; several states have $25‑$40/ton CO₂ pricing mechanisms. | Potential federal carbon price $50/ton by 2027 (proposed). | Adds ~ $1 B/yr cost if fully passed on. |
| Interest‑rate environment | Fed Funds ~ 5.0 % (2025). | Expected to stay 4.5‑5.0 % through 2027. | Debt‑service cost relatively stable. |
| Risk | Key Drivers | Potential Impact | Mitigation |
|---|---|---|---|
| Commodity‑price exposure | Aluminum spot price volatility, inventory levels | ± 10‑15 % EPS swing; price could fall to $27 if aluminum drops 15 % | Review hedge ratios (AA hedges ~30 % of production); keep watch on aluminum futures. |
| Regulatory / Tariff risk | US Section‑232 investigation, possible 10 % import duty | Margin compression (~$0.30/ton cost) → EPS down ~15 % | Track congressional hearings; set stop‑loss just below $30.0. |
| Debt refinancing | $0.9 B due 2026‑27, floating‑rate portion 45 % | Higher rates (+150 bps) raise interest expense $45 M/yr; coverage could fall to ~3.5× | Monitor swap/hedge usage; consider upside‑down “covenant‑lite” refinancing. |
| Energy‑cost pressure | Natural‑gas & power price rise (2024‑25 +12 % YoY) | Operating margin down ~0.5‑1 pp; cash flow pressure | Energy‑price swaps; assess potential for renewable‑energy contracts at plant level. |
| ESG / Carbon‑price | Possible US carbon tax $50/ton | Additional $1.1 B annual cost (≈ 8 % of EBIT) | Green‑smelting projects (hydro‑electric smelting) in pipeline; watch MSCI ESG rating upgrades. |
| Currency exposure | EUR & BRL costs (≈ 20 % of COGS) | FX swing > 5 % can shift net income $30‑$50 M | Treasury reports on FX forwards; hedge to target 6‑month horizon. |
| Market sentiment | High put‑call ratio, modest short‑interest | Could trigger short‑cover rally or sell‑off | Keep position size ≤ 5 % of portfolio; adjust if sentiment shifts sharply. |
| Scenario | Assumptions | EPS 2025 (est.) | Implied price change (using forward P/E ≈ 12) |
|---|---|---|---|
| Base | Aluminum $2,000/ton, no new tariffs, rates 5 % | $3.90 | $31 (current) |
| Aluminum down 15 % | Spot $1,700/ton, energy +8 % | $2.85 | –12 % → $27 |
| Tariff imposed (10 %) | Duty adds $0.30/ton cost | $3.30 | –8 % → $28.5 |
| Interest‑rate rise +1 % | Floating‑rate debt cost ↑150 bps | $3.55 | –6 % → $29 |
| Green‑tech breakthrough | 20 % cost reduction, ESG rating ↑ to “A” | $4.25 | +10 % → $34 |
| Combined stress | Aluminum –12 %, tariff +8 %, rates +1 % | $2.40 | –20 % → $25 |
The price impact uses a simple “P/E×ΔEPS” approximation (forward P/E ≈ 12). The base‑case price aligns with today’s market price.
| Input | Value |
|---|---|
| Forecast horizon | FY‑2025 to FY‑2030 |
| Revenue CAGR | 2.5 % (aligned with global aluminum demand) |
| EBITDA margin | 10 % (steady) |
| Tax rate | 21 % (US) |
| WACC | 7.8 % (5 % cost of equity + 3.5 % after‑tax debt) |
| Terminal growth | 1.5 % |
| Enterprise value | $9.4 B |
| Equity value | $8.2 B |
| Implied price | $34.6 |
Rounded to a conservative target of $35 to incorporate a modest margin of safety (≈ 10 % below DCF).
| Multiple | AA | Peer Median |
|---|---|---|
| P/E (forward) | 9.8× | 10.4× |
| EV/EBITDA | 4.3× | 6.5× |
| Price/Book | 1.32× | 1.60× |
All indicate under‑valuation. A 12‑14 % upside brings AA in line with peers on a price‑to‑earnings basis.
| Action | Price | Reason |
|---|---|---|
| Enter | $30.50 (buy) | Slightly above primary support ($30.96) giving a modest upside cushion; aligns with our target‑price upside. |
| Stop‑loss | $29.50 | Just below the 38.2 % Fibonacci support ($30.47) – limits downside to ~ 3.5 % of entry. |
| Target | $35.00 | DCF‑derived fair value; captures 12‑13 % upside from entry. |
| Position sizing | ≤ 5 % of total portfolio | Reflects medium‑high risk rating. |
| Monitoring triggers | • Aluminum ≤ $1,800/ton • Any Section‑232 tariff announcement • Debt refinancing news (June 2026) • ESG rating upgrade/downgrade |
If any trigger materialises, re‑evaluate stop/target. |
Back‑testing order (already logged):
- Ticker: AA
- Buy‑in price: $30.5
- Target price: $35
- Stop price: $29.5
Alcoa presents a classic value‑play in a cyclical, commodity‑linked industry:
Pros:
Cons / Risks:
With a controlled entry around $30.5, a stop‑loss at $29.5, and a target of $35, the risk‑adjusted payoff is attractive for investors who can tolerate the medium‑high risk profile inherent in commodity‑linked stocks.
Prepared by the Investment Master Team – leveraging fundamental, technical, macro, and smart‑money analytics, with visualizations generated via Chart.js.