Howmet Aerospace Stock Tumbles on SpaceX In-Sourcing Fears

Shares of Howmet Aerospace (NYSE: HWM) fell as much as 6.5% in early trading, hitting a session low of $238.77, amid persistent investor concern over plans by SpaceX to bring its turbine blade manufacturing in-house.

The sell-off was triggered by an announcement from Elon Musk that SpaceX intends to insource the casting of blades and vanes to accelerate the development of new turbine units. This has sparked fears that a major potential customer for Howmet's precision components could be lost, undermining a key scarcity argument that has supported the stock's high valuation.

Wall Street Weighs In

Several Wall Street analysts argued the market reaction is overblown. Deutsche Bank suggested the competitive threat is less severe than the stock's decline indicates, noting that SpaceX may still collaborate with established manufacturers like Howmet. Bernstein maintained its "Outperform" rating on the stock and raised its price target to $328.

Bernstein's outlook is supported by Howmet's existing long-term supply agreements with major industrial gas turbine manufacturers, which extend to 2030, and a planned 38% expansion in blade production capacity. Despite these fundamentals, which include record profit margins and recently upgraded full-year guidance, investor sentiment remains fragile.

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Valuation and Pre-Event Jitters

Adding to the downward pressure is the stock's premium valuation, with a price-to-earnings ratio significantly higher than its sector peers. This makes the stock more vulnerable to negative news. Furthermore, company insiders have reportedly been net sellers of the stock over the past year, with no recent insider purchases recorded.

Investor caution was also amplified ahead of a scheduled appearance by CEO John C. Plant at the Jefferies Global Industrials Conference in New York on Wednesday. Some investors appeared to be reducing their positions to mitigate risks in case his remarks fail to adequately address the SpaceX concerns. A broader market downturn, with the Dow Jones Industrial Average down nearly 1.0% and the S&P 500 down 0.3%, provided no support for the shares.