Key Stats for Alcoa Stock
- Price Change for Alcoa stock: 13%
- $AA Share Price as of Jan. 7: $63
- 52-Week High: $65
- $AA Share Price Target: $47
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What Happened?
Alcoa (AA) stock is down 4% in early-market trading after JPMorgan downgraded the aluminum producer to “underweight” from “neutral, citing concerns about tariff uncertainty and the stock’s stretched valuation.
The downgrade comes despite aluminum prices recently exceeding $3,000 per metric ton, the highest level since spring 2022. While Alcoa stock has surged 73% over the past year, JPMorgan analysts Bill Peterson, Bennett Moore, and Mahima Kakani believe the rally has gotten ahead of fundamentals.
The bank noted that Alcoa stock has massively outpaced the underlying commodity, with aluminum prices up only 7% over the same period. This disconnect raises red flags about whether the stock price is sustainable.
JPMorgan raised its price target on Alcoa from $45 to $50, but the new target still implies a 10% downside from current levels,, given the stock’s recent run-up.
At the same time, the firm reiterated an overweight rating on copper producer Freeport-McMoRan and raised its price target from $58 to $68.
The analysts pointed to several headwinds for aluminum that don’t apply to copper. Most notably, they expect aluminum surpluses to emerge later this year as the market absorbs 1.5 million tons of new annual supply from Indonesia. This fresh supply threatens to put downward pressure on aluminum prices.
JPMorgan also highlighted tariff risks for Alcoa stock. The Trump administration has imposed tariffs on industrial metals under the International Emergency Economic Powers Act.
If the Supreme Court strikes down these tariffs, the government might use Section 232 tariffs instead, which could negatively impact the tariff exemptions Alcoa currently enjoys on its Canadian aluminum.
Alcoa stock has surged 150% over the last five years but trades at a premium today, as seen in our valuation model above.
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What the Market Is Telling Us About Alcoa Stock
The decline in Alcoa stock suggests investors are taking JPMorgan’s concerns seriously. After a 41% rally in just one month, the stock had become vulnerable to profit-taking on any negative news.
At Alcoa’s recent Investor Day, CFO Molly Beerman addressed the tariff situation directly. She noted that at current Midwest premium levels around $0.88 to $0.90, Alcoa’s Canadian tons are “being fully covered for costs.” The company is paying over $900 million annually in tariffs, but higher Midwest premiums have offset this burden.
However, JPMorgan’s concern is that if tariff policies change, those premiums could decline, squeezing margins on Canadian production. The U.S. needs over 4 million metric tons of aluminum annually, but Canada can only supply just under 3 million tons. This means some imports from other regions are necessary, which helps support elevated premiums.
The broader context is important here. Industrial metals have benefited from supply disruptions, a weaker dollar, and robust demand. Copper has been the bigger winner, recently piercing $6 per pound and trading near all-time highs. Aluminum has also performed well, but JPMorgan believes the copper story is more compelling going forward.
The key difference is supply. While copper fundamentals remain tight, aluminum faces the prospect of significant new production coming online from Indonesia. This supply overhang creates downside risk that doesn’t exist to the same degree for copper.
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How Much Upside Does Alcoa Stock Have From Here?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
