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How Have Analysts’ Views on Cliffs Changed in the Last Year?

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Jan. 31 2017, Updated 6:55 p.m. ET

Analyst sentiment

Analysts’ recommendations and ratings among the most important market sentiment indicators for investors to look at. Analyst ratings tell you how bullish or bearish analysts are on a particular company or industry. At the extreme, the sentiment could be an indicator of a change in direction. When everyone is bearish and dumping stocks, it could mean a bottom and better times ahead, and vice versa.

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Recommendations for Cliffs

Analysts covering Cliffs Natural Resources (CLF) have given it 22% “buy” recommendations, 22% “sell” recommendations, and 56% “hold” recommendations. At the beginning of 2016, Cliffs had no “buy” recommendations. It had 50% “sell” and 50% “hold” recommendations. It has a consensus target price of $8, which implies a potential downside of 10%. Its target price has seen an upward revision of 213% in the last year.

Recent upgrades

On November 9, 2016, Jeffries analyst Seth Rosenfeld stated that “the US steel industry should stand out as a unique beneficiary of a Trump presidency. Protectionism will significantly rise; the US is already short steel, and falling imports will improve domestic pricing power.”

Morgan Stanley (MS) also turned bullish on US steel (SLX) stocks after the election. Better fortunes for the US steel sector bode well for Cliffs Natural Resources, the only North American pure-play iron ore pellet supplier. Kurtz has upgraded Cliffs from “underweight” to “equal weight” and increased its target price from $3 to $9.

JPMorgan Chase (JPM) increased its target prices for Cliffs Natural Resources and peers on November 29, 2016. It gave Cliffs an “overweight” rating and raised its target price from $7 to $10.

Downgrades

Macquarie, on the other hand, downgraded six steel stocks on November 29. AK Steel, Nucor (NUE), and Steel Dynamics (STLD) were among the stocks the company downgraded.

Argus downgraded U.S. Steel Corporation from “buy” to “hold” on November 29. The company saw the stock as overbought following its surge after Trump’s win.

Axiom analyst Gordon Johnson believes that an excess supply poses a risk for iron ore prices. For this reason, he recommends a short position on Cliffs, U.S. Steel, and Rio Tinto (RIO).

While analysts’ reactions have been mixed regarding the recent run-up in stocks, most agree that better times appear to be ahead for the US steel sector due to rising infrastructure demand and Trump’s protectionist measures.

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