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Alcoa Stock Extends Selloff Amid Bleak Outlook

Alcoa stock

Alcoa (NYSE: AA) stock price lost more than half of its value in the past two years due to industry-related headwinds. AA share price extended the selloff in 2020 amid expectations for increasing aluminum supplies. Lower than expected results for fiscal 2019 is adding to bearish sentiments. The company missed revenue and earnings expectations for the fourth quarter by a wide margin.

Alcoa stock plummeted 30% in the last twelve months. AA share price is currently trading around $17. The sentiments are turning bearish due to prospects for a surplus in aluminum markets. The overcapacity from China is likely to impact global supply and demand dynamics in 2020.

AA Alcoa Corporation daily Stock Chart

Aluminum Surplus Could Negatively Impact Alcoa Stock    

Alcoa share price extended the declining trend after predictions for supply-related headwinds. The company expects global aluminum supply to exceed the demand by 1M metric tons this year. This is up from a deficit of 900K-1.1M tons last year. Meanwhile, the worldwide demand is likely to increase by 1.4%-2.4%, which is less than the growth in supply.

Alcoa Stock Extends Selloff...

China overcapacity remains a problem for the aluminum market with no change on the horizon,” Jefferies analysts wrote. “While Alcoa is taking actions to cut costs and drive productivity, weak aluminum market fundamentals and a lack of free cash flow are concerns.”

Financials Could Further Decline in 2020

The company generated a huge year over year decline in financial numbers last year. Its fourth-quarter revenue of $2.4 billion declined 27% from the year-ago period. It reported an adjusted loss of $0.31 per share in Q4 compared to a profit of $0.71 per share a year ago. The company also reported a big loss for fiscal 2019.

Alcoa Stock Extends Selloff...

Moreover, it expects a tough time for the aluminum industry. Alcoa anticipates lower results for the bauxite segment because of sluggish pricing and lower volumes along. The company guides flat performances for its alumina and aluminum segments. Overall, Alcoa stock price is likely to remain under pressure in the coming months.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.