BRAZIL – 2019/07/04: In this photo illustration an Alcoa logo seen displayed on a smartphone. (Photo … [+] Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)
SOPA Images/LightRocket via Getty Images
Alcoa stock (NYSE: AA) has seen a 45% jump in the last six months and currently trades at $46 per share. The rally was mainly driven by a significant rise in global aluminum price, which is just shy of $3,000/ton. The price of aluminum per ton has gone up from $2,250 to $2,958 in the last six months, reflecting a rise of over 30%. If you look at the rise in iron ore price over the last one year, it is up almost 60%. The gradual lifting of lockdowns, widening coverage of vaccines against Covid-19, stimulus measures, and new infrastructure plan in the U.S. have led to optimism in the markets of faster economic recovery. The rise in aluminum prices has also helped Alcoa
record its highest profitability since the time the old Alcoa was split into two entities – Arconic and present-day Alcoa, in 2016, with a net income margin of 11% and EPS of $1.63 in Q2 2021. The company is likely to maintain such elevated levels of EPS in the Q3 2021 earnings, due this week. Improving financials and a sharp rise in iron ore prices have led to general optimism in the market about the company’s near-term potential, thus leading to a 45% jump in the stock price. But will Alcoa’s stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely?
According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last five years, returns for AA stock are likely to be over 8% in the next one-month (21 trading days) period after experiencing a 45% rise over the previous six-month (126 trading days) period. Also, there is a 63% chance of the stock giving positive returns over the next one month. But how would these numbers change if you are interested in holding AA stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Alcoa stock price forecast after a rise or fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day! For additional details about Alcoa historical returns and return comparison to peers, see Alcoa Stock Return.
MACHINE LEARNING ENGINE – try it yourself:
IF AA stock moved by -5% over five trading days, THEN over the next 21 trading days, AA stock moves an average of 3.3%.
Some Fun Scenarios, FAQs & Making Sense of AA Stock Movements:
Q1: Is the price forecast for Alcoa stock higher after a drop?
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Consider two situations,
Case 1: Alcoa stock drops by -5% or more in a week
Case 2: Alcoa stock rises by 5% or more in a week
Is the price forecast for Alcoa stock higher over the subsequent month after Case 1 or Case 2?
AA stock fares better after Case 2, with an expected return of 3.1% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an expected return of 5.9% for Case 2. This implies a price forecast of $47.45 in Case 1 and a figure of $48.73 in Case 2 using AA market price of $46.03 on 10/11/2021.
In comparison, the S&P 500 has an expected return of 3.1% over the next 21 trading days under Case 1, and an expected return of just 0.5% for Case 2 as detailed in our dashboard that details the expected return for the S&P 500 after a rise or drop.
Try the Trefis machine learning engine above to see for yourself how the forecast for Alcoa stock is likely to changes after any specific gain or loss over a period.
Q2: Does patience pay?
If you buy and hold Alcoa stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For AA stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
Q3: What about the stock price forecast after a rise if you wait for a while?
The expected return after a rise is understandably lower than after a drop as detailed in Q1. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.
AA stock returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for Alcoa stock by changing the inputs in the charts above.
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since 2016.
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