Alcoa (AA) Fundamental / Technical Stock Outlook:
Shares of Alcoa (NYSE: AA) have climbed 75% over the past year but are only up 1% in 2018, a name seen to benefit from the reflationary environment.
The $9.88B aluminum Company trades 12.7X Earnings, 0.82X Sales, 2.2X Book and 16.3X FCF with a strong balance sheet.
Alcoa (AA) is forecasting 16.5% topline growth this year and EPS growth of 51%. The company appears to be emerging out of a commodity down-cycle with world-class assets, an improved balance sheet, and is a low cost operator.
On the chart below (via TradingView) AA shares are in a rising channel since late 2016 lows and recently got ahead of itself on the move above $60. Shares pulled back to the 50 day moving average and based looking to now extend higher.
Alcoa’s options activity has seen a strong bullish bias the past month, including 10,000 May $57.5 calls opened in late April with shares at $51.20. A buyer of 5,000 June $55 calls for $3.38M on 4/20 remains in open interest, as do 2,000 June $46 calls opened back on 4/11 now deep in the money.
Looking further out, the Jan. 2019 $65 calls were bought 2,800X for $1M on 4/12 and the Jan. 2019 $55 calls 6,750X on 12/18/17 for $2.3M, both remain in open interest. A view from the OptionsHawk Notable Trade Database is below:
Jefferies initiated coverage last week at Buy with a $65 target, and Deutsche Bank on 4-23 raised its target to $70 noting Alcoa is one of the few aluminum companies to benefit when all the commodities in the supply chain increase. JP Morgan hiked its target to $86 on 4-19 citing higher alumina prices and optionality to invest in its third-party bauxite business as well as potential to return cash to shareholders. BMO has an $80 target noting a tight aluminum market and sees $100/share as fundamentally justifiable with an aluminum deficit from China’s supply-side reforms.
Potential Trade Idea: Long the Alcoa (AA) June $55 Calls at $2.50 or Better (Target Exit at $5)
Check out more of my investing research and options trading ideas over at OptionsHawk.  Thanks for reading and good luck out there!
Twitter:Â @OptionsHawk
The author does not have a position in mentioned securities at the time of publication. Â Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
