Howmet Aerospace (NYSE: HWM) dropped after SpaceX (NASDAQ: SPCX) said it plans to manufacture its own castings for industrial gas turbines, raising concerns that the move could threaten one of Howmet’s fastest-growing businesses. Those turbines are increasingly important to the data-center industry, where rapidly expanding artificial-intelligence workloads are creating enormous electricity requirements.
But two Wall Street banks see the selloff as an opportunity to buy the stock. Citigroup (NYSE: C) reiterated its buy rating on Howmet, opened an “upside 30-day Catalyst Watch” on the stock and maintained a $329 price target. Bernstein reiterated an outperform rating and set a $328 price objective.
SpaceX News Creates a Buying Opportunity for HWM Stock
“We see this as a unique and likely short-lived opportunity in shares,” Citi said, arguing that
SpaceX’s decision could actually reinforce the importance of Howmet’s products while highlighting the extraordinary level of demand facing the industrial gas turbine, or IGT, industry.
“We believe the [SpaceX news] (1) reinforces the critical nature of HWM parts and (2) illustrates the exceptional demand HWM faces in [industrial gas turbines] above/beyond its ~$2B revenue target,” they added.
SpaceX’s move reflects the broader pressure companies are facing to secure additional power-generation capacity. Industrial gas turbines can provide a relatively fast and reliable source of electricity for large data centers, but manufacturers and their suppliers have struggled to keep pace with rapidly rising demand.
For investors, however, the question is whether SpaceX’s vertical-integration plans will take business away from Howmet.
Bernstein believes the risk is limited. Howmet controls more than 50% of the market for IGT blade castings and has long-term agreements with major turbine manufacturers, giving it a deeply entrenched position in the supply chain. Bernstein said those relationships should make it difficult for SpaceX to displace Howmet, even if SpaceX successfully brings some manufacturing capabilities in-house.
Howmet’s IGT Casting Dominance Gives HWM Stock an Edge
“We see little risk to Howmet from the SpaceX announcement; instead, we see a positive Message,” Bernstein added. They also pointed to Howmet’s long-term agreements with every major IGT producer and the company’s ongoing efforts to expand production capacity.
In addition, SpaceX could remain a Howmet customer.
Citi also sees a reason not to assume that SpaceX’s decision means the end of its relationship with Howmet or other suppliers. Even if SpaceX ultimately manufactures some IGT components itself, the company is likely to remain a customer within the broader turbine supply chain, according to the firm.
That distinction could prove important. SpaceX may be seeking to eliminate specific bottlenecks rather than completely replace the existing industrial ecosystem. Bringing certain components in-house could allow the company to accelerate production while continuing to source other specialized parts from established suppliers.
HWM Stock Technical Analysis: A Key Test at $250
Howmet Aerospace stock is showing some technical damage following the SpaceX news, but the chart also puts the recent decline into perspective. HWM dropped to around $254 on Sept. 1, down sharply from the stock’s recent highs and now well below its 50-day simple moving average of $276.37.
The first level to watch is the $248-$250 area, which roughly corresponds with the low of the latest selloff. A successful hold above that zone could give bulls a chance to stabilize the stock and begin a recovery. If HWM breaks decisively below it, the next important support area appears closer to $240, where the stock found support during previous pullbacks.
On the upside, the $260-$265 area is the first hurdle. A move back above that zone would improve the near-term technical picture, while reclaiming the 50-day SMA near $276 would provide a much stronger bullish signal.
The MACD is also flashing caution. The MACD line is around -6.12, below the signal line near -2.65, while the histogram is negative. That indicates bearish momentum has strengthened and suggests investors should look for evidence of stabilization before assuming the pullback has run its course.
Still, the longer-term chart remains considerably more constructive than the latest decline suggests. HWM spent much of the past year in an upward trend, with the 50-day moving average generally rising as the stock established a series of higher highs and higher lows. The current move, therefore, looks like an important test of that broader trend rather than definitive evidence that it has ended.
For HWM stock, $250 is the key near-term line in the sand. Holding that level could support a rebound toward $260-$265 and eventually the 50-day moving average. A sustained break below $250, however, would increase the odds of a deeper retracement.
SpaceX May Signal More IGT Demand, Not Less
In the end, Citi and Bernstein argue that the selloff may have gone too far. With a dominant share of the IGT blade-casting market, long-term customer relationships and multiple capacity expansions underway, Howmet remains positioned to benefit from rising demand.
SpaceX’s decision to build more turbine components could therefore be less of a threat than a signal of the enormous growth opportunity ahead. For investors, the immediate concern is competition. For Wall Street analysts, the bigger takeaway is demand, and the latter may ultimately prove far more important for Howmet’s earnings outlook.
