Howmet Stock Weakness a Buying Opportunity Amid SpaceX Threat, Says Bernstein

Recent weakness in Howmet Aerospace (NYSE: HWM) shares, driven by concerns over competition from SpaceX, presents a buying opportunity, according to analysts at Bernstein. The firm argues that the threat of Elon Musk's company manufacturing its own industrial gas turbine (IGT) components is minimal to Howmet's dominant market position.

SpaceX's Power Play

The concerns stem from Elon Musk's announcement that SpaceX intends to produce its own IGT blades and vanes. The move is part of a plan to install 20 gigawatts of power capacity by the end of 2027 to support its terrestrial AI data centers in Bastrop, Texas.

Musk has previously highlighted production bottlenecks caused by a small number of suppliers in the sector. This has been interpreted as a direct challenge to Howmet, which controls more than 50% of the IGT blade castings market and holds a particularly strong position in high-end turbines.

Howmet's Defensible Position

Bernstein analysts assert that Howmet is well-insulated from this potential competition. The company has long-term agreements with every major industrial gas turbine producer, which are believed to extend to around 2030. This aligns with Musk's own comments that the market for turbine blades is effectively sold out through that period.

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Key points from the analysis include:

• Technical Hurdles: Producing these complex components at scale is a significant technical challenge, and SpaceX may struggle to ramp up production quickly enough to meet its 18-month target.
• Internal Focus: SpaceX's manufacturing efforts are expected to be focused on its own internal power needs rather than competing with Howmet in the broader commercial market.
• Market Strength: SpaceX's decision to build its own capacity underscores how tight the market is amid rising demand for power generation, a positive indicator for an established leader like Howmet. The company's IGT business grew 38% in the second quarter.

Analyst Outlook

Bernstein maintained its Outperform rating on Howmet Aerospace with a price target of $328. This represents a potential upside of approximately 24% from the stock's August 28 closing price of $264.85.

The firm's view suggests that rather than signaling weakening prospects for Howmet, SpaceX's move validates the strength and tightness of the IGT market, where Howmet remains the clear leader.