Morgan Stanley has changed its stance on Alcoa Corp., cutting the stock's rating from Overweight to Equalweight even as it increased its price target to $64 from $52. The move comes after a sustained rally in the shares, with market data showing Alcoa trading around $58.55, a price-to-earnings ratio of 13.33 and a market capitalization near $15.3 billion.
The broker said the stock's recent outperformance relative to peers appears to have incorporated much of the benefit from stronger aluminum market dynamics. Specifically, Morgan Stanley pointed to elevated London Metal Exchange (LME) aluminum prices and a U.S. Midwest Premium that recently topped $1 per pound as drivers that have already been reflected in the share price.
That positioning is supported by recent returns: the stock has posted a 102.95% gain over the last six months and a 68.33% rise over the past year, indicating a substantial rerating over a relatively short period. As a result, Morgan Stanley judges the current risk-reward to be more balanced than before, constraining the near-term upside toward its adjusted target.
Beyond commodity-price tailwinds, the bank called attention to several company-specific execution questions. Morgan Stanley noted delays in Alcoa's timetable for converting curtailed aluminum sites into data centers, a program the company has been marketing to hyperscalers. The broker said that while Alcoa has identified 10 high-priority curtailed sites for potential conversion to hyperscale data center use, the pace of those conversions has not met prior expectations.
The analyst team also raised the possibility that mounting U.S.-Canada trade frictions could complicate prospects for Section 232 exemptions for Canadian aluminum, which would be relevant to Alcoa's supply and market dynamics.
At the same time, Morgan Stanley acknowledged operational initiatives at Alcoa designed to lift productivity and cut costs, and it noted the company's ongoing efforts to optimize its asset portfolio. The bank also recognized expected Inflation Reduction Act production tax credits for U.S. aluminum output, estimated at $50-60 million annually, as a supportive factor for domestic production economics.
Volatility in the shares remains pronounced: the company's beta is 1.95, underscoring sizeable price swings that investors should weigh alongside fundamental drivers. The broker concluded that the stock's strong year-to-date performance and the incorporation of favorable aluminum-market moves mean the investment case no longer merits an Overweight recommendation under its framework.
Recent company results and analyst activity provide additional context for the mixed view among market participants. Alcoa reported fourth-quarter 2025 adjusted earnings per share of $1.26, beating a forecast of $0.93, while revenue of $3.4 billion exceeded a projection of $3.28 billion. Several research shops updated their views in response to the quarter: BofA Securities raised its price target on Alcoa to $38.00 from $33.00 but retained an Underperform rating; BMO Capital trimmed its target to $65.00 from $67.00 while keeping a Market Perform rating. A BMO analyst commented that the quarterly beat was driven largely by a one-time CO2 credit rather than by operational improvements.
Collectively, these analyst moves and the company's earnings print illustrate a range of perspectives on Alcoa's trajectory, from recognition of near-term market tailwinds to caution around sustainability of earnings and execution risks tied to asset conversions and trade policy.
Key takeaways:
- Morgan Stanley downgraded Alcoa to Equalweight and raised its price target to $64 from $52.
- Market data indicate the stock trades at $58.55 with a P/E of 13.33 and a $15.3 billion market cap, after large recent gains.
- Analysts remain divided following Alcoa's Q4 2025 beat and guidance on tax credits and asset sales, producing mixed sentiment across brokerages.
Investor considerations:
- Sectors affected include aluminum and basic materials, with downstream implications for data center real estate where Alcoa is marketing curtailed sites.
- Trade-policy developments and commodity-price shifts are material drivers for Alcoa's outlook and investor returns.