I tried to post this, but it was flagged as financial advice, so I have to add this:
This is not financial advice or a stock tip. Just what I am planning on doing and open for discussion.
**Anyone else looking at Alcoa (AA) before earnings on 15 October?**
I'm considering a small position here. Not looking to marry the stock, just think the setup for a bounce looks interesting.
**My thesis:**
* AA has been beaten down and is sitting around a significant weekly support area.
* Aluminium has had a genuine global supply shock following the Middle East disruption.
* Aluminium prices remain high, which should be good for Alcoa's margins.
* The Middle East situation still looks extremely uncertain, so I don't think the supply issue is necessarily over.
* Alcoa's finances actually look pretty solid. Q2 produced **$901m adjusted EBITDA and $422m FCF**, with roughly **$1.4bn cash**.
* Most importantly, we've already seen how sensitive Alcoa is to aluminium pricing. Q2 adjusted EBITDA jumped **51% QoQ**, with higher metal prices one of the major drivers.
There are obvious risks. The alumina side hasn't been performing nearly as well, Pinjarra has had operational issues, input costs could rise, and expectations for Q3 have probably moved higher already.
But given the combination of **depressed share price + technical support + high aluminium prices + constrained global supply + decent Alcoa financials**, I think the risk/reward heading into earnings looks pretty interesting.
I'm only looking for around a **10% move**, not claiming AA is suddenly a long-term compounder.