Alcoa Shares: No Respect

No Respect - Rodney

Despite all its efforts to reinvent itself the stock is still down.

Alcoa Inc (NYSE:AA) is always the first company to report every earnings seasons and more often than not they disappoint.  The company has been reinventing itself as an areospace and automotive supplier. The company is supposed to split into two companies during the current quarter. When will Wall Street believe in the company and help shareholders return on investment?

Alcoa told the world they would split last September. The stock had a nice bounce from the low $9 range to just under $11 in early October.  That was the last positive move for AA shares. Alcoa shares have traded volatile since that time and in the past 12 months lost 1/2 their value. Year-to-date AA is down 22% and Friday they closed at $7.68.  Granted the stock seems to have bottomed since last month and is no longer near its 12 month low of $6.14.  The question is when will the company split come and is there room for growth?

AA Alcoa Inc. daily Stock ChartThe best chance to make some money from Alcoa will be following the split. Until then nobody is going to invest in the aluminum business and the dream of a new age aerospace sexy metal supplier. Last week aluminum prices hit a new 7 year low. China is not helping the aluminum pricing as they continue to hoard their supply.  The aluminum stockpiling game will only keep prices low for longer, potentially making the problem even worse once that aluminum enters the supply chain. Bad news for Alcoa.

Last month Aloca reported Q4 2015 revenue that fell 18% from the prior to $5.25 billion. Alcoa's revenue missed Street expectations of $5.29 billion. The drop in revenue was mainly due to a 25% drop in raw-aluminum prices. The good news is this year Alcoa expects global aerospace sales to increase between 8% and 9%, driven by strong demand for large commercial aircraft and jet engines.  Automotive demand will be modest growth between 1% and 4%  Not great numbers but while AA trades at a low share price it becomes worth a look.

The opportune time to invest in Alcoa is before the two companies break apart allowing investors to get in while aluminum prices are down. They won't stay down forever, they never do. 

MASTERY Bottom Line (Ninja Style)

Timing is everything and the time to make an entry into Aloca is before the split.