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Alcoa shares downgraded from Buy to Hold
Edited by : AL CIRCLE
1 min read
Alcoa, like other metals and mining companies, caught a nice tailwind last week when the Fed announced its big new asset-buying program. But Alcoa’s recent strength may fall off in the face of an ongoing surplus in the aluminum industry, notes Jefferies analyst Peter Ward, who downgraded shares to Hold from Buy.
“[F]or us to foresee upside in Alcoa shares much beyond $11, a strong bull case for aluminum is needed in our opinion,” Ward writes.
He considers Freeport-McMoran Copper & Gold (FCX) to be a much better way to invest in the sector.
“In our view, aluminum production simply does not have the high barriers to entry that copper mining does. Yet, on our estimates, FCX shares trade at a substantially lower valuation than AA. This is true despite FCX having a much higher yield. And, in our opinion, FCX has a better balance sheet with net cash and substantially less legacy liabilities.”
Alcoa fell 0.7% in afternoon trading.
“[F]or us to foresee upside in Alcoa shares much beyond $11, a strong bull case for aluminum is needed in our opinion,” Ward writes.
He considers Freeport-McMoran Copper & Gold (FCX) to be a much better way to invest in the sector.
“In our view, aluminum production simply does not have the high barriers to entry that copper mining does. Yet, on our estimates, FCX shares trade at a substantially lower valuation than AA. This is true despite FCX having a much higher yield. And, in our opinion, FCX has a better balance sheet with net cash and substantially less legacy liabilities.”
Alcoa fell 0.7% in afternoon trading.
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