Out of the Gate: Alcoa Falls

Alcoa Inc. shares fell at the open Thursday despite an upgrade from a Friedman, Billings & Ramsey analyst, who said a recent selloff was overdone, given a good fundamental demand outlook for metals and the possibility the company will be bought out. Shares of the Dow Jones industrial average component fell 90 cents or 2.4 percent to $36.19 in early trading, as the broader market dropped sharply after a French bank froze three funds invested in the U.S. subprime mortgage market because of liquidity concerns. The Dow was down $164.04 at 13,493.81 in early trading. Partly due to dashed speculation that Alcoa might be bought out, shares of the aluminum maker are down 12 percent in the past four weeks. Friedman, Billings & Ramsey analyst Amir Arif, in a client note, lifted his rating to "Outperform" from "Market Perform." "The recent sell-off in the stock has completely removed any takeover premium in the name and provides upside potential from current levels with or without any acquisition materializing," the analyst wrote. Arif said he still thinks Alcoa might be bought out. However, the likelihood and potential price a sale could garner are probably lower than what investors were previously expecting, he noted. "While a takeover might take some time to materialize given that volatility in the credit markets needs to subside before a large deal can be done, we believe that there is a good probability that it still occurs within six months," the analyst wrote. Alcoa could receive a takeover offer in the $47 to $50 per share range, the analyst wrote. If the company remains a stand-alone entity, it is worth $40 per share, he wrote. Canadian aluminum producer Alcan recently accepted a takeover offer from Rio Tinto that topped a previous bid from Alcoa. Analysts in the past said Alcoa's hostile May bid for Alcan essentially put Alcoa on the block.