Alcoa Corporation (AA) is poised for big gains, driven by the ongoing AI (artificial intelligence) arms race, according to Morgan Stanley. Analyst Carlos De Alba from Morgan Stanley stated yesterday that the AI (artificial intelligence) arms race has sparked interest in repurposing industrial sites with existing MW (megawatt) capacity.
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Based in the U.S., Alcoa Corporation is a global producer of bauxite, alumina, and aluminum products.
Morgan Stanley Highlights Alcoa’s AI Monetization Opportunity
Alba further highlighted that Alcoa could unlock value from its curtailed assets as tech companies seek sites to convert into data centers. Moreover, he noted that Alcoa’s three curtailed sites with a combined capacity of 440MW hold a potential value of $400 million-$900 million, representing 4%-8% of the company’s current market capitalization. Notably, curtailed sites refer to operations or facilities that have been temporarily or permanently shut down or reduced in capacity.
The U.S. President Donald Trump’s recently announced Project Stargate has further ignited an AI arms race. The project is backed by a $100 billion investment and support from major tech giants, including Arm (ARM), Microsoft (MSFT), Oracle (ORCL), Nvidia (NVDA), and OpenAI.
Alba has a Buy rating on AA stock with a price target of $55, implying an upside potential of over 40%.
Alcoa Exceeds Q4 Expectations
Meanwhile, Alcoa Corporation also unveiled its Q4 and full-year 2024 results. Alcoa reported Q4 adjusted earnings of $1.04 per share, exceeding analysts’ estimates of $0.93. Additionally, the company’s revenues increased 20% sequentially to $3.5 billion, surpassing the consensus forecast of $3.29 billion.
Alcoa Closes 2024 on a High Note
For the full year, Alcoa reported a 13% year-over-year revenue increase, totaling $11.9 billion. During the year, the company achieved annual production records at five smelters across the U.S., Canada, and Norway. A key highlight for the year was the completion of the acquisition of Alumina Limited. This acquisition solidifies Alcoa’s position as a leading bauxite and alumina producer.
Overall, Alcoa showcased notable improvements in its financial performance, backed by strength in alumina and aluminum pricing alongside higher alumina shipments. In Q4, third-party alumina shipments increased by 12% sequentially, driving a 45% revenue growth in the Alumina segment.
On the downside, results were partially offset by higher restructuring charges and increased production costs. To be specific, the company recorded an $82 million restructuring charge tied to the curtailment of the Kwinana refinery, primarily driven by rising water management costs.
Is Alcoa a Good Stock to Buy?
According to TipRanks consensus, AA stock has a Moderate Buy rating based on five Buy and two recommendations. The average Alcoa Corporation share price target is $49, which is 26.35% above the current price level.
