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Why Analysts Love CLF When US Steel Sector Is in Doldrums

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Analysts’ recommendations

Cleveland-Cliffs (CLF) currently has 72.7% “buy” ratings from the 11 analysts covering it, according to the consensus compiled by Thomson Reuters. In the past year, analyst sentiment for Cleveland-Cliffs has improved. Compared to 72.7% “buy” recommendations currently, CLF stock only had 50% “buy” recommendations in May 2018.

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Peers’ ratings

Cleveland-Cliffs’ target price of $13.5 implies an upside of ~49% based on its current market price. Among Cleveland-Cliffs’ US steel peers (XME), ArcelorMittal (MT) has 80% “buy” recommendations, while Nucor (NUE), Steel Dynamics (STLD), and U.S. Steel (X) have 71.4%, 61.5%, and 25% “buy” recommendations, respectively. AK Steel (AKS) has the lowest percentage of “buy” recommendations at 7.1%.

Rating changes

In contrast to its peers, analyst sentiment for Cliffs has been improving. On April 26, Credit Suisse (CS) upgraded CLF stock from “neutral” to “outperform” and raised the target price from $13 to $14. CLF analyst Curt Woodworth likes the company’s potential after the hot-briquetted iron plant ramps up fully in 2020. He sees a potential stock price value of $16 to $18 after the plant becomes operational even if the steel prices remain low.

On April 25, B. Riley boosted CLF’s target price from $14 to $15 following the company’s earnings beat in Q1 and pricing guidance.

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