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On Monday, BMO Capital Markets upgraded Century Aluminum (NASDAQ:CENX) shares from Market Perform to Outperform, setting a price target at $22.00. The upgrade comes as the analyst, Katja Jancic, sees the company’s current valuation as attractive after a recent decline in share prices, with InvestingPro data showing a significant 17% drop in the past week. Jancic noted that Century Aluminum is trading at multiples of 5.6 times and 5.3 times the firm’s estimated EBITDA for 2025 and 2026, respectively, while current P/E ratio stands at an attractive 5.22x.
The analyst believes the market has not fully recognized the advantages Century Aluminum could reap from the favorable Midwest Premium (MWP) and aluminum prices. Furthermore, the potential for increased shareholder returns and the optionality provided by the Hawesville facility were highlighted as additional reasons for the upgrade. According to InvestingPro, the company has demonstrated strong profitability with a diluted EPS of $3.29 over the last twelve months, though it currently does not pay dividends to shareholders.
Century Aluminum, which operates as a primary aluminum producer in the United States, has seen its stock trade below what BMO Capital considers to be an appropriate valuation based on spot-based EBITDA, which is currently less than 4.0 times. This discrepancy between the company’s performance and its stock valuation prompted the positive adjustment in the stock’s rating. InvestingPro data reveals the stock has delivered an impressive 73.45% return over the past year, despite showing high volatility with a beta of 2.5.
The new price target of $22.00 suggests a potential upside from the company’s recent trading price of $17.38, with analyst targets ranging from $22 to $27, indicating BMO Capital’s confidence in Century Aluminum’s prospects. This upgrade is expected to draw investor attention to the stock as the market digests the implications of the analyst’s outlook.
The upgrade by BMO Capital Markets reflects a positive sentiment towards Century Aluminum’s financial health and future performance. The firm’s analysis points to a robust outlook for the company, supported by favorable industry conditions and internal potential for growth and returns to shareholders.
In other recent news, Century Aluminum reported its fourth-quarter 2024 financial results, showcasing a revenue of $631 million, which surpassed forecasts by $116.73 million. Despite this revenue beat, the company’s earnings per share (EPS) of $0.49 fell short of the anticipated $0.59. The company announced plans for a new U.S. smelter project, which could potentially double the industry’s size. Analysts have shown interest in the company’s future, with B. Riley’s Nick Giles highlighting the impact of rising Midwest premiums on Century Aluminum’s earnings potential. The company is optimistic about the aluminum market, expecting global demand to surpass supply in 2025, as noted by CEO Jesse Gary. Operational challenges were mentioned, particularly at the Mount Holly facility, which experienced some instability during the quarter. Additionally, the company’s JAMALCO facility implemented a workforce reduction to enhance productivity. Century Aluminum projects a Q1 2025 Adjusted EBITDA between $75 million and $85 million, with expectations for full-year shipments to reach 700,000 tons.
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