Scared by "job theft," Howmet (HWM.US) collapsed! Citigroup and Bernstein loudly assert it was wrongly punished: SpaceX (SPCX.US) entering the game is precisely a sign that demand is too strong.

Howmet Aerospace (HWM.US), a giant in the aerospace precision components sector, closed down 7.51% on Monday, with a mid-session plunge of 9%, hitting a two-month low and marking its largest single-day drop since April 2025. The trigger for the sell-off was a statement from Elon Musk on social platform X. Musk indicated that SpaceX (SPCX.US) and Tesla, Inc. (TSLA.US) are each working towards building a capacity of 100 gigawatts per year for CECEP Solar Energy, but natural gas power generation will still be crucial to fill the electricity gap in the coming years. He noted that the casting of turbine blades and vanes is the main obstacle limiting turbine production increases. If SpaceX were to manufacture these components in-house, it could reduce the operational timeline for natural gas turbine units by up to 18 months. Earlier reports indicated that SpaceX is constructing a blade and vane casting facility in Bastrop, Texas. Musk's statement officially confirmed the strategic intent behind this plan. The facility is reportedly meant to serve a planned 20-gigawatt power project, primarily to power artificial intelligence (AI) data centers, with a target completion date by the end of 2027. Howmet is one of the few companies globally capable of casting high-temperature blades and vanes for industrial gas turbines. The gas turbine business has become one of Howmet's fastest-growing sectors. In the first quarter, gas turbine revenue soared 39% year-on-year, with a projected annual revenue increase of 25% for 2025. The strong demand from AI data centers for quickly deployable power has led to a shortage of turbine components, bolstering Howmet's pricing power and stock performance. SpaceXs entry could theoretically divert future orders away from Howmet and weaken the current bargaining advantage stemming from supply shortages, which is a significant reason for Monday's sell-off. However, Citigroup, a major Wall Street firm, views Howmet's decline as a potential buying opportunity. Citigroup pointed out that SpaceX's entry does not reflect a deterioration in Howmet's competitive position, but rather strong demand and scarcity in turbine manufacturing capacity. The firm stated that SpaceX mainly plans to produce these components for its own use while continuing to source from the existing industrial gas turbine supply chain. This news further highlights the critical nature of the components produced by Howmet and suggests that demand may exceed the company's approximately $2 billion industrial gas turbine revenue target. Citigroup's positive outlook is not limited to the gas turbine market. The firm describes Howmet as one of the leading compound growth companies in the aerospace and defense sectors within its coverage, noting the companys record profitability, large backlog of commercial aircraft orders, robust aftermarket business, and growing defense aerospace operations. Citigroup also emphasized that Howmet's engine products and fastening systems have margins exceeding 30%, with a strong balance sheet and favorable capital allocation for shareholders. Citigroup indicated that commercial aircraft manufacturers are still striving to increase production, and demand for new aircraft continues to outstrip supply. This supply-demand imbalance, coupled with Howmet's aftermarket business, could provide tailwinds for the company's profit growth in the coming years. The firm expects Howmet's adjusted earnings per share to reach $5.37 in 2026, $6.76 in 2027, and $8.08 in 2028. The report mentions that Citigroup has higher earnings expectations for 2027 and 2028 than the market consensus. The firm maintains a "Buy" rating on Howmet and sets a target price of $329, indicating a 34.3% upside compared to Monday's closing price. Howmet is expected to discuss the prospects for its aerospace and industrial gas turbine businesses at the upcoming investor meeting. Citigroup believes this could serve as a catalyst for the stock price to rise. More details regarding new capacity, customer commitments, and the potential role of SpaceX in the supply chain will help determine whether the market's initial concerns regarding the competitive landscape will persist. Additionally, investment bank Bernstein has reached a similar conclusion. Analysts at Bernstein stated that SpaceX's actions appear to be driven more by supply constraints and a desire to strengthen control over the supply chain rather than dissatisfaction with Howmet. Manufacturing turbine blades that can withstand extreme high temperatures and mechanical stresses requires specialized casting equipment, technological expertise, and complex coating processes, which constitute significant barriers to rapid entry into this field. Bernstein maintains an "Outperform" rating on Howmet and raises its target price from $248 to $328. Bernstein also questions whether SpaceX can establish mass production capabilities within the 18-month timeline proposed by Musk. The firm expressed skepticism that SpaceX would be able to replicate every aspect of the existing mature manufacturing processes, and even if successful, it is likely that the output would mainly be used to meet its own substantial power needs rather than engaging in extensive competition with existing suppliers. Meanwhile, Howmet is also expanding its turbine blade business. Bernstein indicated that new capacity started coming online in the second quarter, with at least six more expansion projects expected to launch by the end of the fourth quarter. Overall, these projects could increase capacity by as much as 38% compared to the first quarter of 2025. Howmet has also signed agreements with major turbine manufacturers extending through 2030. The contract demand corresponding to these agreements aligns with Musk's assertion that the shortage of turbine components may persist until the end of this decade, supporting the view that increased production by SpaceX could drive overall turbine deployment volumes up rather than just crowding out Howmet's sales. In summary, for investors, the core issue may not be whether SpaceX can independently produce some turbine blades, but whether the electricity demand driven by AI infrastructure will grow sufficiently fast to keep all qualified manufacturers operating at full capacity. Both Citigroup and Bernstein believe this news indicates that the entire industry is facing a capacity shortage, and this industry backdrop may ultimately strengthen Howmet's market position rather than weaken it.