1 Aluminum Stock To Buy, 2 To Avoid

silver foil on brown textile

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The lightweight and recyclable properties of aluminum make it a suitable alternative in a wide range of applications. With the reopening of industrial activities, surging aluminum demand has pushed aluminum prices up to 10-year highs. The metal has climbed almost 80% in price from May 2020, and analysts expect the global aluminum market to grow at a 5% CAGR of 5% between 2021 – 2026.

Given this backdrop, we think fundamentally sound aluminum stock Constellium SE (CSTM) could soar in price in the near term.

Conversely, a military coup in Guinea, the location of the world’s largest bauxite reserves, is anticipated to precipitate a supply shortage and uncertainty in the market. So, we think fundamentally weak aluminum stocks Alcoa Corporation (AA) and Century Aluminum Company (CENX) are best avoided now.

Stock to Buy:

Constellium SE (CSTM)

CSTM produces and sells high-valued aluminum products and solutions for a range of applications. The company operates through three segments: Packaging & Automotive Rolled Products; Aerospace & Transportation; and Automotive Structures & Industry. It is headquartered in Paris, France.

In June CSTM partnered with Audi, a luxury brand of Volkswagen AG (VWAGY), to provide advanced aluminum solutions for the Audi e-tron GT. Given the use of aluminum in electric vehicles (Evs) due to its lightweight property and the growing EV market, this partnership is expected to benefit CSTM significantly in the near term.

In its second fiscal quarter, ended June 30, CSTM’s revenue increased 47.2% year-over-year to €1.52 billion ($1.78 billion). Its new income and EPS attributable to equity holders was  €108 million ($126.62 million) and €0.73, respectively, up a substantial amount from their negative year-ago values. The company’s adjusted EBITDA rose 109.9% from the same period last year to €170 million ($199.30 million).

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