How Alcoa Stock Can Fall 50%?
Despite a sharp rebound in earnings, Alcoa’s (NYSE:AA) stock performance has been underwhelming, weighed down by tariff costs, capacity delays, and volatile commodity markets. Shares are down roughly 16% year-to-date, even as profitability has improved, underscoring investor skepticism over whether the aluminum giant can sustain momentum in a turbulent macro environment.
Over the past four years, Alcoa’s top line has climbed from about $9.3 billion in 2020 to nearly $12.8 billion over the trailing twelve months, reflecting a 37% expansion. In Q2 2025, the company reported $3.02 billion in revenue, up nearly 4% from a year earlier, while net income surged to $151 million compared to just $31 million in the same quarter of 2024. Earnings per share jumped to $0.63, marking a 387% increase. Operating cash flow also improved significantly, reaching $488 million for the quarter, with the company ending June with $1.5 billion in cash.
Yet, despite these solid operational results, Alcoa’s stock has struggled. The lingering question is whether growth can keep pace with the mounting pressures from trade policies and smelter disruptions. During this same stretch, the stock remains almost flat over the past year and remains down close to 16% year-to-date. Its price-to-EBIT (P/EBIT) ratio has compressed from above 10.2x in 2022 to around 5.3x today. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative — having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, see –ServiceNow Stock To Less Than $450?
Core Challenges and Investor Concerns
A number of factors contribute to investor apprehension, creating potential headwinds for Alcoa’s stock.
Tariffs: A Persistent Drag
The most immediate headwind comes from U.S. aluminum tariffs, which have become a costly burden for the company. In Q2 2025 alone, tariffs shaved $115 million off earnings, with an additional $90 million impact expected in Q3. Alcoa has even diverted over 100,000 tonnes of Canadian aluminum away from the U.S. market, as selling domestically has become uneconomical under the current trade regime. For a company already tied closely to global pricing cycles, these tariffs amplify margin risk and erode competitive positioning.
Smelter Setbacks and Capacity Concerns
Another challenge comes from operational hiccups. The long-delayed restart of the San Ciprián smelter in Spain has weighed on shipment volumes, forcing Alcoa to trim its 2025 aluminum shipment guidance to 2.5–2.6 million metric tons, down from the earlier forecast of 2.6–2.8 million. For a commodity producer where scale is critical, these setbacks raise concerns about future growth capacity and revenue generation.
Historical Performance During Downturns
Alcoa’s stock has shown volatility during past market downturns, performing worse than the S&P 500 index.
Inflation Shock (2022)
- AA stock experienced a peak-to-trough decline of 75.4%.
- In comparison, the S&P 500 index declined by 25.4%.
COVID-19 Pandemic (2020)
- AA stock saw a decline of 74.5%.
- The S&P 500’s peak-to-trough decline was 33.9%.
The significant 75% drawdown in 2022 suggests that a substantial decline from current levels is not unprecedented. This history of volatility, combined with a high stock price, contributes to investor caution. See – Buy or Sell AA Stock – for more details.
Takeaway
Alcoa remains a global leader in aluminum production, backed by an integrated value chain and a strong balance sheet with over $1.5 billion in cash. Its recent earnings recovery highlights its operational resilience, but the stock’s muted performance in 2025 reflects deep investor caution. Tariffs, smelter delays, and volatile aluminum prices represent meaningful risks, and with shares already priced for cyclical uncertainty, even modest setbacks could keep the stock under pressure.
In short, while Alcoa’s fundamentals look stronger than they did a year ago, the macro and policy backdrop remain challenging. Unless tariff relief or a sustained aluminum price rally materializes, investors may find it difficult to justify betting on a major rebound in the near term.
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