Alcoa Inc. (NYSE: AA) has a new big fan on Wall Street. Wells Fargo’s Sam Dubinsky has initiated analyst coverage on the aluminum giant with an Outperform rating. What stands out here is that Wells Fargo is now among the most bullish of all Wall Street analysts on this ongoing turnaround story.

Thomson Reuters has a consensus analyst price target of $18.72 for Alcoa, and the highest stated price target is $25.50. The new target from Wells Fargo is a valuation range of $22 to $24.

While Alcoa has historically been tied to aluminum growth and alumina pricing, the company decided to focus more on advanced technologies and higher-end component products for aerospace and autos. This is giving it real products, with a stronger base, and generating revenue bases that may be easier to predict than the core metals prices out into the future.

Dubinsky said:

We like the growth story driven by mid and downstream operations, as well as management’s history of taking costs out of the model. The outlook for the commodity upstream operations is more controversial, but we think the price recovery looks rational. We value shares at $22-24 based on an EV/EBITDA multiple of 8.0 to 8.5 times our 2015 estimate. Our 2014E/2015E EPS are $0.83/$1.24.

Another driver for Wells Fargo is Alcoa’s exceptional cost cutting and productivity improvements. Dubinsky said:

Alcoa has shown incredible financial discipline, achieving ~$7.5B of cost and productivity improvements since 2009. The company has done a particularly good job in upstream operations with the goal of improving its position on the global cost curve (targeting 21st percentile in alumina and 38th percentile in primary aluminum in 2016 vs. 30% and 51%, respectively, in 2010)… Primary aluminum operations have been incredibly volatile, but profitability has increased meaningfully in 2014 on the heels of better regional pricing premiums.

Alcoa shares were up almost 15 at $17.36 in mid-afternoon trading on Thursday. Its 52-week trading range is $9.29 to $17.75, and the current market cap is about $20.5 billion.

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