Citi Issues 'Buy the Dip' on Howmet Aerospace After SpaceX Turbine Shift Triggers Stock Plunge

The Quick Take

• Citi upgraded Howmet Aerospace to a buy recommendation after shares plunged on news SpaceX is shifting turbine production in-house, arguing the concern reflects a capacity shortage rather than competitive threat.
• Analysts contend SpaceX's in-house move signals the aerospace sector cannot procure sufficient titanium and nickel superalloy components, ultimately strengthening Howmet's pricing leverage for remaining capacity.
• Citi views the stock's decline as an attractive entry point, maintaining that Howmet's proprietary manufacturing capabilities in commercial aviation and defense remain largely irreplaceable at scale.

Howmet Aerospace shares declined sharply after SpaceX announced plans to bring turbine component manufacturing in-house, a move initially interpreted by the market as evidence of Howmet losing a significant customer to vertically integrated production. Citi's analyst team responded by upgrading the stock, reframing the narrative: SpaceX's decision was driven by the aerospace sector's inability to source sufficient titanium and nickel superalloy turbine components from external suppliers rather than by dissatisfaction with Howmet's quality or pricing. In this interpretation, the customer's departure is a symptom of supply scarcity, not competitive failure — and may paradoxically increase pricing power for Howmet's remaining aerospace and defense customer base.

The pricing leverage argument rests on Howmet's singular position in precision-cast aerospace components. The company's manufacturing processes for single-crystal turbine blades, structural castings, and fastening systems for commercial aircraft and defense platforms require decades of process development and specialized capital equipment that cannot be replicated quickly by new entrants. This technical moat has historically allowed Howmet to maintain strong margins through aerospace cycles, and Citi's analysts believe the SpaceX-related concern creates a temporary sentiment overshoot that disconnects price from fundamentals.

The risk to the bullish thesis is concentrated in two areas: first, whether SpaceX's in-house manufacturing success eventually enables other launch and aerospace companies to develop similar self-supply capabilities, gradually eroding Howmet's addressable market; second, whether commercial aviation demand — the primary earnings driver — maintains current recovery trajectory amid rising global travel costs. Key monitoring points include Boeing and Airbus production rate announcements, defense contract awards involving Howmet's fastening and structural systems, and quarterly pricing realization commentary from Howmet management. A confirmed Citi price target or upgraded rating makes the entry timing case more concrete.

Synthesized from 2 sources.