Is it time to buy Alcoa as stock recovers from the post-earnings dip?

By:
on Apr 30, 2022
Updated: Sep 1, 2022
  • Alcoa Corporation stock has fallen by almost 25% in a month
  • The stock weakness has been heightened by an earnings miss
  • Alcoa is recovering, but investors should still wait

When Alcoa Corporation (NYSE:AA) reported its Q1 2022 earnings at least a week ago, investors were less excited. Revenue of $3.29 billion came short of the expected $3.46 billion but higher than $2.87 billion last year.

Nonetheless, an EPS of $3.06 in the quarter was higher than expectations of $2.86 and $0.79 last year. We believe the quarter results were strong enough to warrant buying a dip, and here is more support.

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Timna Tanners gave an outperform rating on Alcoa, with a $102 price target after the quarterly results. He says that aluminum prices are supported by the lack of new supply and an increase in global costs.

The company shared similar views saying that it sees higher prices in the second quarter. It still warned that higher material and energy costs could partly offset the extra returns. Tanners further point out that investors are keen on miners’ names like Alcoa to hedge against inflation. 

With a 25% drop in a month, Alcoa carries a favorable risk and reward ratio on a buy to previous levels. Structural demand for the miner’s products will boost the stock. In five days, the stock has already recovered 4%. The key question to investors now is, where should they buy?

Alcoa stock technical analysis

Source – TradingView

Technically, Alcoa stock is bearish post-earnings. The drop happens after touching an overbought level of $97. Nonetheless, we see a further drop from the current $67 to the likely support of $55. Investors should wait to buy lower after the current decline ends.

Summary

Alcoa stock has been dropping in the month. The missed earnings have heightened the weakness. However, the stock is bound to jump while Wall Street also maintains a buy rating. Consider buying it at $55 and using a free trading platform to avoid high fees.

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