Alcoa Corp (AA)
Aluminum / alumina / bauxite (Pittsburgh, PA) · Sep 4, 2026
FCFF · normalized EBIT + aluminum-price sensitivity
OVERVALUEDRISK: Very High
Base $27.00 vs price $50.01 · Downside -46%
The Take
The valuation is the aluminum price — everything else is a rounding error. At today's spot ($3,291/t, +26% YoY, a multi-year high), the model supports ~$46; on a through-cycle average it's ~$27. The market's $50 requires aluminum to hold current peak levels indefinitely.
That's the whole risk in one sentence: you are long aluminum with an equity wrapper and financial leverage on top. A 20% pullback in the metal (well within its normal range) takes value down ~67% to the low $20s; a 20% rally takes it to $74. There is no margin of safety — only a directional commodity bet. Size and hold it as exactly that, not as a value position.
Risk Profile — Very High
| Exposure | Severity | Direction / note |
| Aluminum (LME) price | Very High | Long — dominates ±67% of value |
| Alumina (API) price | High | Long — second-largest swing |
| Energy / power cost | Med–High | Short — ~30% of smelting cost |
| Financial leverage | Medium | $850M net debt amplifies cycle |
| China supply / tariffs | Medium | Policy-driven, two-way |
Inventory is metal. Alcoa holds bauxite→alumina→aluminum, so its stock value AND its revenue both move with the LME. Unhedged, this is a pure long-aluminum position. Secondary: alumina (API) price, and energy — power is ~30% of smelting cost, so a gas/electricity spike compresses margin even if metal holds.