Morgan Stanley analysts upgraded Alcoa (NYSE:AA) to Equalweight from Underweight and increased their price target on the stock to $36.50 from $28.50. The analysts noted that the operational concerns that affected Alcoa throughout 2023 have largely been resolved, leading to a more balanced risk-reward scenario.
The analysts highlighted that the company has made significant progress in the first quarter of 2024 with its cost reduction efforts. These efforts are part of an action plan designed to enhance annualized EBITDA by approximately $645 million by 2025, compared to the EBITDA of about $0.5 billion in 2023. The current aluminum price environment has facilitated the execution of these self-help measures.
Additionally, clarity provided by authorities in Western Australia regarding bauxite operations has eliminated some operational uncertainties. Moreover, Alcoa could benefit from expanded Inflation Reduction Act tax credits for aluminum if the credits are extended to include raw materials.