Analyst recommendations and ratings are some of the most important market sentiment indicators you can watch. Analyst ratings tell you how bullish or bearish analysts are on a particular company or industry at a given time.
At the extreme, a sentiment could be an indicator of a change in direction going forward. Generally, when everyone is bearish and dumping stocks, it could mean a bottom and better times ahead, and vice versa.
The above graph shows analysts’ recommendations for Cliffs Natural Resources (CLF) and US (VTI) (QQQ) steel peers United States Steel (X), AK Steel (AKS), and Nucor Steel (NUE). Cliffs has “buy” recommendations from 22.0% of analysts and “sell” recommendations from another 22.0%. About 56.0% of analysts are recommending a “hold.” Its target price implies an upside of 3.5% at the current market price of $9.80.
Analysts are upbeat on Cliffs
Credit Suisse (CS) has raised its outlook for iron ore. It raised Cliffs’s target price from $2 to $8 on March 3, 2017. However, it’s still not very positive on Cliffs stock with its “underperform” rating.
FBR raised Cliffs’s target price from $10 to $11 after the company’s solid 4Q16 earnings beat and a stronger outlook for 2017. It also views the company’s equity offer positively. FBR analyst Lucas Pipes commented about the offer, “We view the company’s decision to proactively address 2020 maturities positively, especially on the recent strength in iron ore prices.”
Macquarie is upbeat about Cliffs’s 2016 results as well as its equity offering announcement. It believes the offering is an important step toward removing its debt burden. It could also put Cliffs on a path of stronger growth. Macquarie said, “If management’s guidance proves to be accurate, we believe the shares may be worth as much as $20.”
JPMorgan raised its target price for Cliffs stock from $10 to $12 but retained its “overweight” rating on the stock.
Axiom’s negative view
Gordon Johnson, an Axiom analyst, has a different point of view. Axiom raised its iron ore price outlook for 2017 from $45 per ton to $60 per ton, but it remains “negatively biased” toward its outlook. The firm also maintained its “sell” rating on Cliffs with a target price of $2. It raised its target prices for Rio Tinto (RIO) and Fortescue Metals Group (FSUGY).