In the past year, analysts’ sentiment for Cleveland-Cliffs (CLF) has improved. Compared to 58% “buy” recommendations currently, Cleveland-Cliffs stock only had 30% “buy” recommendations at the beginning of March 2018.
Cleveland-Cliffs’ target price of $13.2 implies an upside of ~31% based on its current market price. Among Cleveland-Cliffs’ US steel peers (XME), ArcelorMittal (MT) has 100% “buy” recommendations, while Nucor (NUE), Steel Dynamics (STLD), and U.S. Steel (X) have 80%, 71%, and 29% “buy” recommendations, respectively. AK Steel (AKS) has the lowest percentage of “buy” recommendations at 13%.
The positive turnaround for Cleveland-Cliffs is mainly due to improvements in the company’s fundamentals and the positive macroeconomic backdrop due to tariffs.
Recent rating changes
On March 5, Morgan Stanley set a target price of $13 for Cleveland-Cliffs and maintained its “hold” rating.
On February 11, J.P. Morgan (JPM) raised Cleveland-Cliffs’ target price from $15 to $17. The J.P. Morgan analyst thinks that Cleveland-Cliffs’ stock price doesn’t reflect the company’s commercial projects and higher realized prices. The analyst is also positive on Cleveland-Cliffs’ hot-briquetted iron project, which is expected to start in mid-2020. J.P. Morgan has an “overweight” rating on Cleveland-Cliffs stock.
On February 8, Jefferies raised Cleveland-Cliffs’ target price from $11.5 to $13.75 after the company reported strong fourth-quarter results. The analyst is positive that the tightening pellet supply should benefit the contract terms for Cleveland-Cliffs after 2020.
On January 8, Cowen initiated coverage on Cleveland-Cliffs stock with a “market perform” rating and a target price of $8.5.
Analysts turned positive on Cleveland-Cliffs stock after management took care of the debt concern. The growth opportunity in Cleveland-Cliffs’ hot-briquetted iron plant improved investors’ sentiments. The latest improvements like re-initiating dividends and a focus on the accretive US steel markets are other positives for the stock.
Next, we’ll discuss the relative valuation for Cleveland-Cliffs stock.
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