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S&P 500   3,585.62
DOW   28,725.51
QQQ   267.26
Want to Increase Your Conversion Rates? This Is the Biggest Threat to Your Success.
Tailor an Options Trading Strategy to Fit Your Needs (Ad)pixel
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
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Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
India launches 5G services, Modi calls it step in new era
Tailor an Options Trading Strategy to Fit Your Needs (Ad)pixel
UK train strikes and energy hikes add to a week of turmoil
NIH to fund unproven ALS drugs under patient-backed law
S&P 500   3,585.62
DOW   28,725.51
QQQ   267.26
Want to Increase Your Conversion Rates? This Is the Biggest Threat to Your Success.
Tailor an Options Trading Strategy to Fit Your Needs (Ad)pixel
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
Tailor an Options Trading Strategy to Fit Your Needs (Ad)pixel
Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
India launches 5G services, Modi calls it step in new era
Tailor an Options Trading Strategy to Fit Your Needs (Ad)pixel
UK train strikes and energy hikes add to a week of turmoil
NIH to fund unproven ALS drugs under patient-backed law
S&P 500   3,585.62
DOW   28,725.51
QQQ   267.26
Want to Increase Your Conversion Rates? This Is the Biggest Threat to Your Success.
Tailor an Options Trading Strategy to Fit Your Needs (Ad)pixel
Russia accused of 'kidnapping' head of Ukraine nuclear plant
EU chief: New Greece-Bulgaria gas pipeline 'means freedom'
Tailor an Options Trading Strategy to Fit Your Needs (Ad)pixel
Danish Energy Agency says Nord Stream 2 gas pipeline under Baltic Sea appears to have stopped leaking gas
India launches 5G services, Modi calls it step in new era
Tailor an Options Trading Strategy to Fit Your Needs (Ad)pixel
UK train strikes and energy hikes add to a week of turmoil
NIH to fund unproven ALS drugs under patient-backed law

Electric Vehicles Can Drive Alcoa Stock Higher

Electric Vehicles Can Drive Alcoa Stock Higher
  • Global aluminum and materials products maker Alcoa stock has fallen (-19%) for 2022
  • Shares spiked last year on optimism for the infrastructure bill, which turned out to be a sell-the-news event.
  • EVs require more aluminum than regular cars and the  EV market is expected to grow at a 23.5% compound annual growth rate
Global aluminum and materials products maker Alcoa (NYSE: AA) has stock fallen (-19%) for 2022. Inflationary pressures prompting rising interest rates have cut into the country’s largest aluminum maker’s margins. While most people are aware of common uses for aluminum ranging from soda cans and kitchen utensils to foil, window panes, energy, and housing and construction, there’s a growing use for them in electric vehicles (EV). Aluminum is a low-density, lightweight, non-toxic, strong and rust-free metal which help creates lighter cars. Shares have fallen over 40% since hitting its highs of $98.09 in March of this year. The Company continues to beat analyst estimates even as they get lowered. Raw materials prices continue to rise and cut into Alcoa’s margins.

Alcoa Looks Cheap

Shares spiked last year on optimism for the infrastructure bill, which turned out to be a sell the news event. However, the EV market can power growth as the segment continues to grow. EVs require more aluminum than regular cars. The EV market is expected to grow at a 23.5% compound annual growth rate (CAGR) up to 2028. Shares are trading at just 6X forward earnings making this an almost certain value play. Alcoa also announced a $500 million stock buyback program after beating its Q2 2022 earnings estimates by $0.18 per share. Prudent investors seeking exposure in both the aluminum and EV segment can look for opportunistic pullbacks in shares of Alcoa.


Electric Vehicles Require More Aluminum

The average internal combustion engine (ICE) vehicle had approximately 459 pounds of aluminum in 2020. Light trucks like the Ford F-150 has nearly 550 pounds of aluminum. Higher-end sports cars like the Tesla Model S has over 800 pounds of aluminum. Aluminum is ideal for EVs with its light, non-corrosive, and durable properties. While EV maker Tesla (NASDAQ: TSLA) is leading production, major U.S. automakers like General Motors (NYSE: GM) and Ford (NYSE: F) are going all-in on the future of all-electric powered vehicles. General Motors has committed to spending $35 billion in EV development to introduce 30 models between 2020 and 2025. They expect to build more than 1 million EVs a year in North America and expects to have an all-electric vehicle line-up by 2035. The Biden administration has set a goal of 50% of all new cars to be electric by 2030. The world’s second largest automaker, Volkswagen (OTCMKTS: VWAGY) expects at least half its car sales to be electric by 2030.

China is The Largest Aluminum Producer

Alcoa is the largest public producer of aluminum in the U.S., but China is by far the largest producer and consumer of aluminum in the world. The government also subsidizes many of the production elements. The country of 1.3 billion people has the world largest auto sector producing near 30% of global production. China has a largest network of EV Superchargers and EVs have an even lower waiting period than traditional internal combustion engine vehicles. Leading EV makers like Xpeng (NYSE: XPEV) and NIO (NYSE: NIO) are still growing at a double digit clip with a very long runway. Europe follows as world’s second largest consumer of aluminum.

Electric Vehicles Can Drive Alcoa Stock Higher

AA Opportunistic Entry Levels For Consideration

Using the rifle charts on the weekly and daily time frames provide a precision view of the price action playing field for AA stock. The weekly rifle chart inverse pup breakdown triggered on the rejection of the $66.92 Fibonacci (fib) level. The weekly downtrend is stalling as the weekly 5 period moving average (MA) rises at $46.58 and 15-period MA stalls at $53.56. The weekly stochastic crossed back up with a mini pup towards the 20-band setting up a make or break. The weekly market structure low (MSL) buy triggers on the breakout through $48.34. The daily stochastic made a full oscillation up to the 90-band to peak and slip. The daily uptrend is slowing as the 5-period MA stalls at $49.02 and rising 15-period MA at $46.32. The daily 50-period MA is falling at $50.83 and daily 200-period MA at $63.19 The daily upper Bollinger Bands (BBs) sit near the $52.21 fib level. The daily lower BBs sit near $38.95. The daily is very  overbought so it’s important not to chase this one as waiting for the daily stochastic is oscillate down. Prudent investors can monitor for opportunistic pullback levels at the $44.42 fib, $42.45, $40.71 fib, $39.47, $36.66 fib, $34.59 fib, and the $33.10 fib level. Upside trajectories range from the $66.92 fib up towards the $90.66 fib level.

 

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Alcoa (AA)
2.4758 of 5 stars
$33.66-5.0%1.19%6.61Hold$78.55
Tesla (TSLA)
2.2995 of 5 stars
$265.25-1.1%N/A95.87Hold$285.93
General Motors (GM)
2.8666 of 5 stars
$32.09-3.5%1.12%6.09Moderate Buy$55.28
Ford Motor (F)
2.8344 of 5 stars
$11.20-2.4%5.36%3.92Hold$18.18
Volkswagen (VWAGY)
2.3436 of 5 stars
$16.25-4.7%3.26%4.86Hold$230.00
Compare These Stocks  Add These Stocks to My Watchlist 

Should you invest $1,000 in Alcoa right now?

Before you consider Alcoa, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Alcoa wasn't on the list.

While Alcoa currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

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Jea Yu

About Jea Yu

Contributing Author: Trading Strategies

With over 20 years of active participation and analysis of the US equities, options and futures markets, Mr. Yu brings fresh insights into the workings of the financial markets. He has published four books by esteemed publishers McGraw-Hill, John Wiley & Sons, Marketplace Books and Bloomberg Press. His brainchild, the Underground Trader, was voted Forbes Best of the Web for four consecutive years under the active trader category. He has been a featured speaker all over the country at various expos and seminars who enjoys a standing-room-only reception in the largest convention halls from New York to Las Vegas. He has been quoted and featured in USA Today, Wall Street Journal, Traders Magazine and the Financial Times and various trade publications like Stocks & Commodities, Active Trader and Online Investor. Mr. Yu has a B.A. in Liberal Arts and minor in Business Administration from the University of Maryland.
Contact Jea Yu via email at JeaYu21@gmail.com.
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