How Much Could Alcoa’s Stock Grow in 2018?

by Trefis Team
+51.52%
Upside
28.61
Market
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Trefis
AA
Alcoa
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Alcoa (NYSE: AA) displayed a phenomenal performance in 2017, having risen by almost 90% during the year. This rise was largely driven by the rising prices of aluminum, which is a key component produced by Alcoa. Going forward, we expect Alcoa to continue to perform well in the upcoming year with the rising demand for aluminum as a result of an increasing share of Electric Vehicles (EVs) in the automobile market and due to the supply disruption faced with the initiation of production curtailments in the Chinese economy. The same findings have been outlined in our interactive valuation model for Alcoa which estimates Alcoa to reach $52 based on our multiple valuation analysis.

Our base case assumes Alcoa’s P/EBITDA multiple to stand at ~4.5 for 2018, close to its historical average. Additionally, we estimate adjusted EBITDA to stand at ~$ 2 billion, with its revenue largely driven by its aluminum and alumina segment as they continue to benefit from a higher pricing environment. In case you have different assumptions contrary to our viewpoint, you can go to our interactive platform and modify our assumptions (blue dots) to arrive at your own price estimate for Alcoa.

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