Alcoa hits two-week high on Goldman upgrade

Alcoa Inc., the largest U.S. aluminum maker, climbed to the highest in more than two weeks after Goldman Sachs upgraded the stock and raised its price target.

The shares rose 3.7 percent to $9.58 at 1:23 p.m. in New York, after reaching $9.75, the highest intraday price since Nov. 6.

Goldman Sachs analyst Sal Tharani lifted the recommendation on Alcoa to "buy" from "neutral", and boosted the price target to $11 from $8.

The investment bank cited strong growth from the company's high-margin downstream business and its continued transition to a mainly downstream business.

"We see a long-term value opportunity in Alcoa as the market begins to value Alcoa as a leading downstream aluminum producer with an improving cost structure on the upstream, providing upside irrespective of continued weakness in the aluminum market," Tharani wrote in a note emailed to clients today.

Tharani expected the New York-based company to boost revenue by more than $2 billion and rake in additional earnings of $525 million from end-market growth and share gains over the next three years.

Tharani sees the downstream businesses, particularly in engineering products, less conditioned by aluminum prices and sees an upside potential for the group despite estimates that stem from demand for aluminum.

Goldman Sachs expected productivity improvements and a positive cash flow by next year.

The current consensus among 18 analysts is to "hold" stock in Alcoa Inc.