Alcoa shares could rise as aluminum prices rebound, Credit Suisse said. Analyst Curt Woodworth upgraded the aluminum production stock to outperform from neutral and named it a top pick. His price target of $50 implies an upside of 38.4% from Wednesday’s close. Woodworth said the stock should benefit as LME aluminum prices recover in the next year. Global demand for aluminum should rise, he said, and Alcoa’s performance has a high correlation to those prices. “Aluminum has compelling secular demand growth driven by increased consumer preference for sustainable materials as aluminum is infinitely recyclable (packaging) and leverage from the EV / energy transition is greatly underappreciated versus copper, in our view,” he said in a note to clients Thursday. Strong physical premiums so far this year in the U.S. and EU as well as the fall in Chinese semiconductor exports both support the improving outlook. Meanwhile, he said supply dynamics in China also suggest upside ahead if hydro remains challenged. Woodworth also said macro trends are helping, with the Chinese outlook improving in the second half of the year. He said it’s better to be early on mining stocks before they bounce as investors pivot from recessionary concerns to hopes for economic recovery after the Federal Reserve cuts interest rates. He said the business also has positive catalysts on the horizon related to the planned restart of its aluminum smelter in San Ciprián, Spain, and its work on a new way to produce aluminum that eliminates direct greenhouse emissions. To be sure, Woodworth said there are risks related to delays in Australia, any capacity shifts in China or if there are any changes to broader global demand. — CNBC’s Michael Bloom contributed to this report.
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