Freedom’s investment idea: Alcoa shares may rise on the risk of an aluminum shortage

Freedom Broker analysts recommended opening a long position in Alcoa Corporation (AA) shares with a target price of $60 over a two-month horizon and a stop-loss at $43. At the current price of $51,01, the upside potential is 17,62%. The investment idea is based on a possible rise in aluminum prices due to supply disruptions, which have little impact on the company’s own facilities.

Alcoa is an American metals company

Alcoa is one of the world’s largest vertically integrated aluminum producers. The company mines bauxite, produces alumina, and manufactures primary aluminum.

Alcoa operates around 25 production sites and equity-accounted assets in eight countries, including Australia, Brazil, Canada, the United States, and European countries. The company’s market capitalization is $13,53 bn.

Shortage risks will support aluminum prices

The idea from Freedom Broker analysts is that rising risks to global aluminum supply are not yet fully reflected in prices. Disruptions in the Middle East, possible changes in Guinea’s export policy, and restrictions on Russian exports could reduce available metal volumes and increase regional premiums.

The conflict in the Middle East has already led to the shutdown of more than 2,5 million tons of annual aluminum smelting capacity and nearly 2 million tons of alumina production capacity. 

For Alcoa, these events are a price catalyst. The company’s production assets are geographically diversified and mostly located outside high-risk zones. This allows Alcoa to benefit from higher aluminum prices without a comparable increase in operational threats.

Alcoa sharply increased revenue and profit

In Q2 2026, Alcoa’s revenue reached a record $3,966 bn versus $3,193 bn in the previous quarter and $3,018 bn a year earlier. Sequential growth was 24%. Net income totaled $407 million, or $1,53 per share, versus $425 million, or $1,60 per share, in Q1 and $164 million, or $0,62 per share, a year earlier.

Adjusted net income rose to $562 million from $373 million in the previous quarter and $103 million a year earlier. Adjusted earnings per share reached $2,12 versus $1,40 in the prior quarter and $0,39 a year earlier.

Adjusted EBITDA excluding special items increased 51% quarter over quarter, to $901 million. The increase was driven by higher aluminum prices and higher shipments. Operating cash flow totaled $608 million, free cash flow was $422 million. At quarter-end, the company had $1,4 bn in cash.

The South32 deal will strengthen the company’s position

As a long-term driver, analysts cite the acquisition of aluminum assets from South32, one of Australia’s largest mining and metals companies, in Brazil, South Africa, and Australia. The initial deal value is about $4,1 bn, and the terms also предусматривают additional consideration of up to $750 million.

According to Freedom Broker estimates, synergies and portfolio efficiency gains could deliver about $900 million in net present value. The purchase will strengthen Alcoa’s position in bauxite mining, alumina production, and aluminum smelting, and will also enhance the competitiveness of its global portfolio.

New capacity

In Q2, Alcoa increased aluminum production by 5% compared with the previous quarter, to 636 thousand tons, thanks to capacity restarts in Spain, Brazil, Norway, and Australia.

The company also redeemed the remaining $219 million of bonds with a 6,125% coupon and maturity in 2028. Strong cash flow gives Alcoa the ability to reduce leverage, fund production projects, and prepare for the acquisition of South32 assets.

Not an individual investment recommendation.