Boston, MA 10/04/2013 (wallstreetpr) – Shares of Alcoa Inc (NYSE:AA) were down 2.00% to close at $7.89. The 52-week price range of company’s stock stood at $7.63 to $9.37.
The company has been witnessing declining investor confidence in its financials, which is also reflected by the declining market share of the company. To add to its woes, the company declined by as much as 2% in its last trading session.
Following this, the company has been downgraded to sell with a price target of $5.50 per share by Deutsche Bank analyst Jorge Beristain. This is a straight 32% decline from the current price at which the shares are being traded. This implies that the company’s stock may be overvalued, and may see a further plunge, that took a sharp one in the near future. The company is also expected to post depressing results in its impending quarter earnings result. The company is engaged in a variety of business, with aluminum business being at the core of its operations. The company has not been able to fare well at this business, which is the reason why such shares have been downgraded in recent times.
Moreover, lower medium term aluminum price outlook has rendered the prospects of weak revenue, which may result in cutting down 2014 and 2015 EPS well by over half. Market has been speculating the company to spin off Primary itself, so that the company can get rid of surmounting losses. This will help improve its Balance sheet, maximizing its equity value, which has taken a constant hit after such losses; this has resulted in erosion of wealth form the company, with in future prospects of a revival. Also, since the aluminum prices are revised downside, it does not leave much scope for the company for a comeback in this sector.
The company’s metal business which contributes a major portion to its total revenues, shall further be pulled back, if aluminum prices continue to decline. The said business unit is a $
Billion drag to the equity value of the aluminum giant. The company seems to be taking a hit from both sides, aluminum staying flat, along with premia reverting back to normal levels.
