JPMorgan has valuation concerns following a sharp rally in shares of Alcoa . The bank downgraded the aluminum producer to an underweight rating from neutral. Analyst Bill Peterson did lift his price target to $50 per share from $45, but that implies about 20% downside from Wednesday’s close. The downgrade comes following a period of outperformance for the company. Shares of Alcoa have surged 74% over the past year. AA 1Y mountain AA 1Y chart “Our rating reflects relative outperformance, with shares trading well above ~5x historical levels on spot,” Peterson said. “While we commend management’s continued execution on driving efficiencies and cost downs, we view the risk-reward skewed negatively at current valuation.” The analyst pointed to Chinese inventory levels, which seem to have risen 15% this month versus the December 2025 average, as a headwind. Peterson said this showed that Chinese buyers have successfully resisted higher prices, resulting in weaker import demand. High supply levels in Indonesia might also contribute to stagnating aluminum prices. “We acknowledge that our call may be ‘early’ given what appears to be a risk-on environment to start the year, including across the commodity space, but with our assumption of looming supply, led by Indonesia later in the year, we anticipate aluminum metal pricing can decouple from copper, leveling out and driving downside in AA shares,” he said. Peterson also expects tariffs to remain a near-term overhang. “We continue to view any S232 tariff relief as a ‘call option,’ although it appears upcoming USMCA negotiations may delay any decision,” he wrote. The analyst added that another potential catalyst for the company, improved grades at Alcoa’s bauxite mines, remains a 2028 story at the earliest. Alcoa’s potential asset sales have also been forecast to bring in near-term cash inflows “likely well below” the long-term goal of between $500 million to $1 billion by fiscal year 2023.
