Allegheny Technologies Setting Up For Higher Highs As Aerospace Recovers

The shares of specialty alloy producer Allegheny Technologies (NYSE:ATI) have already doubled lows in the late fall of 2021, as the market has started pricing in both the recovery in the commercial aerospace market and management's progress on self-help initiatives. Still, these are the early days of the recovery, and it doesn't look as though the market is fully pricing in what this newly more efficient company can earn as the cycle ramps further.

To be clear, I do not think that Allegheny is a good buy-and-hold stock for long-term investors. The commercial aerospace cycle should take several years to play out, but even with the improvements made to the business, I think full-cycle returns are unlikely to be all that attractive. In other words, this is a stock to try to own on the way up, but you really don't want to ride along for the down-cycle. Given low double-digit EBITDA margin in 2022, accelerating into the mid-teens and beyond over the next five years, I think there's at least 10% to 15% more near-term upside today.

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Allegheny Technologies Setting Up For Higher Highs As Aerospace Recovers