There’s a buying opportunity in shares of aluminum producer Alcoa now that China is reopening, according to Citi. Analyst Alexander Hacking upgraded shares to buy from neutral, saying that aluminum is “the next leg of the China reopening trade.” “Aluminum has relatively light positioning, tends to arrive late to bull market parties, is relatively lightly positioned, and has a myriad of idiosyncratic upside risks as well as being exposed to macroeconomic- (including major credit easing and higher oil prices) and El Niño-related supply-side risks. The rolling smelter cuts from southwestern China due to power availability restrict supply response to margins,” Hacking added. What’s more, Alcoa shares can rise 35% from Tuesday’s close, according to the analyst. Hacking raised his price target to $65, up from $55 previously. The aluminum stock added more than 1% in Wednesday premarket trading. For Alcoa, the macro outlook is growing more positive at a time when the stock is “relatively out of favor with investors,” as they focus more on other China reopening beneficiaries such as copper and coal, the analyst said. Shares are up more than 5% this year, slightly outperforming the S & P 500, which is up 4%. Citi also has a positive long-term view on the stock. “Alcoa has relatively low debt, strong liquidity, and relatively low-cost upstream assets. Citi is long-term bullish on the outlook for aluminum. We see more upside than downside at current levels,” read the note. —CNBC’s Michael Bloom contributed to this report.
