Analyst: Alcoa Stock Offers "Deep Value," Earnings Potential

The security still carries a more than 27% year-to-date deficit

Digital Content Manager
Sep 16, 2022 at 10:03 AM
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Morgan Stanley is setting its sights on the mining and metal sector, with the brokerage earlier doling out bull notes to stocks that offer “deep value” and have strong earnings potential. Alcoa Corp (NYSE:AA) is among those names, with the firm upgrading the  equity to “overweight” from “equal-weight.” At last check, AA is down 0.3% to trade at $43.01.

The majority of analysts were already optimistic towards Alcoa sock coming into today, but there's still room for additional upgrades. Of the nine in coverage, five said "strong buy" coming into today, while four carried a "hold" rating. Echoing this, the equity's 12-month consensus target price of $59.47 is a 37.9% premium to current levels.

Meanwhile, short sellers have been piling on, with short interest up 44.6% over the last two reporting periods. The 10.93 million shares sold short now account for 6.1% of the stock's available float.

While calls are still outpacing puts, the latter have been getting picked up at a much faster-than-usual clip over the last 10 weeks. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Alcoa stock sports a 50-day put/call volume ratio that sits higher than 94% of readings from the past year.

It's worth noting the equity's Schaeffer's Volatility Scorecard (SVS) ranks at 81 out of 100, indicating the stock has frequently exceeded option traders' volatility expectations during the past year.

The security is fresh off a failed late-August attempt to conquer the $58 level, which has not been crossed since a bear gap pushed shares below that level in June. The 100-day moving average has also been stifling Alcoa stock, which carries a 27.9% year-to-date deficit. 

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