Goldman Sachs is bullish on aluminum–and Alcoa (AA).
Associated Press Goldman Sachs’ Sal Tharani and team see Buy-rated Alcoa gaining more than 30%% during the next six months. They explain why:
We raise our 6-month P/E-, EV/EBITDA-, and DCF-based price target to $15 from $12, and raise our multiples an average of 15% to reflect the strong growth potential from automotive aluminum sheet and continued aerospace strength. We expect [Alcoa] to see multiple expansion as investors gain more confidence in the demand growth for automotive aluminum sheet, growing aerospace demand, and its continued cost cutting initiative in the upstream businesses. We believe automotive aluminum will be the fastest growing market for metals over the next several years, where Alcoa has a leading position in the US.
We believe the North American automotive aluminum sheet market will grow at an over 50% CAGR from 2013-2016 and believe the Ford (F) F-150 is just tip of the iceberg. We expect further announcements of aluminum body vehicles in the US, as automakers work to achieve CAFE emission standards and gain customers who are more concerned about fuel costs. For instance, Ford expects the F-150 to have +30% fuel efficiency gains by switching to an all-aluminum body; when comparing the steel Toyota (TM) Venza (with only 3% Al content) to the aluminum intensive
model (37% content) fuel efficiency improved by over 18%.
Tharani also added Constellium (CTSM) to his conviction list with a $35 price target.
Shares of Alcoa have gained 2.5% to $11.34, while Constellium has advanced 1.9% to $25.25. Ford has risen 0.6% to $14.93 and Toyota Motor is up 0.7% at $117.84.
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