Struggling Aluminum Stock Dented by Bear Note

AA is still a downgrade risk considering the bullish sentiment around the stock

Deputy Editor
Oct 23, 2023 at 9:04 AM
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Aluminum stock Alcoa Corp (NYSE:AA) is lower ahead of the open, last seen down 2.6% following a bear note from Bank of America. The Wall Street brokerage downgraded AA to "neutral" and slashed its price target to $25 from $35, with fears of a near-term earnings decline.

Bank of America's new price target is just below where the aluminum stock closed on Friday close at $24.01. The shares are today set to open at $23.38, their lowest levels since February 2021. This doesn't bode well for an equity that's already down more than 47% in 2023.

Today's bear note is in line with recent analyst sentiment. Beginning on Oct. 19, covering brokerages began to cut their price targets, with J.P. Morgan Securitas, BMO, Jefferies, and Citigroup all issuing adjustments lower over the last three days.

More could be on the way, too, as the consensus 12-month price target of $29.04 represents a premium of roughly 21% to AA's Friday close. What's more, four of 11 covering brokerages rate Alcoa stock a "strong buy," which leaves a little room for downgrades as well.

In the options pits, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows Alcoa stock with a 50-day call/put volume ratio of 3.48, ranking in the top-heavy 97th annual percentile. In other words, long calls have been preferred over puts by a bigger-than-usual margin during the last two weeks of trading. An unwinding of optimism in the options pits could also place pressure on AA stock.


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