Alcoa will kick off Earnings Season at 52-week low

Alcoa (NYSE:AA) - Large Logo

Earnings season kicks off next week, is it good for Alcoa?

 

Alcoa Inc (AA) hasn't had one up day in the last month. The stock has quietly been hitting new 12 month lows almost daily.  Year-to-Date Aloca has almost lost 1/3 of it's market share. Is it the right time to place a bet before the call next week?

Mastery is hoping the bad news is already baked into the reduced share price of just over $11 a share.  In Feburary Alcoa was riding high at $17. It appeared the global aluminum company was back in the good graces of Wall Street. One glance at the chart and there's no compeling reason to take a chance on what appears to be a falling knife.

AA Alcoa Inc. daily Stock Chart

Today Deutsche Bank cut its target price from $19 to $16 but they still maintain a "Buy" rating.  Finviz.com has an average analyst target price of $16.30 a share.  That implies a 47% gain over the next 12 months if they are right. Could they be?

Ticker Price 52 Wk-High 52 Wk-Low P/E EPS From 52wk High From 52wk Low Finviz TP % from Finviz TP
AA $11.10 $17.75 $10.94 21.21 0.52 -59.91% 2.58% $16.30 46.85%

It's tempting to take a risk on AA at these levels.  After all the professionals covering the stock believe the stock price should be much higher. But why has it been tanking to new 52-week lows week after week?

Sterne Agee CRT analyst Josh Sullivan, in a note released last week, painted a bleak near-term picture for the aluminum industry and cut his target share price on Alcoa to $12 from $17 on concerns its stock might be fully valued. Alcoa shares promptly fell even further. On Wednesday they hit a 52-week intraday low of $10.94 a share.  

You can't be fooled by the 'average target price' because many of these analysts are not willing to go to bat for the stock price as it continues dropping.  

The good thing is expecations are low at this point and with the share price near $11 any good news could send the stock flying. Short interest in Alcoa stands at 5.9% of shares outstanding, more than twice as many as at the start of the year.  If we do hear good news on July 8th during Alcoa's Q2 earnings report that short interest is going to fuel a rally in the stock price. 

Alcoa's stock had a stellar 2014 returning almost a 50% advance.  This year has sucked, as we stated it's down 30%.  Just because the stock looks "cheap" doesn't mean it won't keep falling. If AA beats the Street next week expect a rally. It's a roll of the dice at this point. Best of luck to all those playing the call.  Alcoa’s share price dropped immediately after release of the company’s last three quarterly results, reflecting primarily disappointment with either revenue, management’s market outlook, or both.