It's official: Alcoa (NYSE: AA) is
As you've probably heard by now, last week Alcoa spun off its value-added products division, Arconic (NYSE: ARNC), retaining its commodity bauxite and aluminum businesses as a sort of rump Alcoa. Investors reacted promptly to the division,
But where does Alcoa go from here, you ask? Turns out three analysts decided to initiate coverage of Alcoa stock, post-split, just this morning. Here's what they think you should know about the new and improved Alcoa.
1. Cowen likes, doesn't love, Alcoa
From least to most optimistic, we begin with Cowen & Co. (
2. Morgan Stanley is easier to please
Morgan Stanley (
At the same time, it's interesting to note that Morgan Stanley only believes Alcoa stock is worth about $27 a share, which is $2 less value than Cowen ascribes to it. Nevertheless, where Cowen counsels caution, Morgan Stanley is climbing out on a limb and rating Alcoa overweight (i.e., buy).
3. Citi sees significant upside
Both these views dwindle in comparison to what Citigroup (
Really? Not just "significant," but "very significant"? Well, let's see about that...
The most important thing: Valuation
Here's what we know about Alcoa post-spinoff, according to the latest data from
As far as the balance sheet goes, Alcoa has offloaded the bulk of its debt on Arconic, with the result that it now carries only $233 million in long-term debt. With $322 million in cash, the company has no net debt at all. (It does, however, have about $424 million in pension liabilities, which are a sort of long-term obligation, or debt.)
Valuation-wise, currently the stock carries a $4.6 billion market capitalization, or about 0.5 times sales, and an enterprise value even lower. Whether that's a bargain, though, depends largely on whether Alcoa can return itself to profitability. Currently, the consensus of all analysts who follow the stock is that this will not happen before 2018.
Only time will tell if they're right about that.
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