Last Update 15 Dec 25

Fair value Increased 42%

CLF: Rare Earths Hype Will Likely Fade Against Weak Steel Fundamentals

Analysts have nudged our Cleveland Cliffs fair value estimate higher to approximately $8.62 from about $6.06 per share. This reflects a modestly higher long term valuation multiple even as they factor in softer near term revenue growth, still pressured margins, and a mixed macro backdrop for steel demand.

Analyst Commentary

Recent Street research on Cleveland Cliffs underscores a cautious tone that tempers the upside implied by our modestly higher fair value estimate. While some major firms see room for appreciation following the latest earnings update, a number of bearish analysts are flagging downside risks tied to both macro and company specific factors.

A key area of debate centers on the durability of the recent share price rally. Bearish analysts argue that the move has been driven more by sentiment around initiatives such as rare earth opportunities and new commercial agreements than by a demonstrable improvement in core steel profitability, execution, or balance sheet strength. They see this as leaving the stock vulnerable if expectations are not met.

At the same time, target price revisions and rating changes point to growing concern that current valuation already discounts much of the anticipated recovery in U.S. sheet prices and medium term earnings power. The tightening spread between bearish price targets and the prevailing share price suggests limited margin of safety should macro conditions or company level execution disappoint.

Macro risks also loom large in the more cautious research. Bearish analysts highlight the combination of slowing commodity demand in China and an uneven industrial backdrop in key end markets, even as some upside is expected from a potential rebound in U.S. and European steel demand. This mix raises questions about the sustainability of pricing and volumes beyond the near term.

Goldman Sachs stands out as a notable outlier on the positive side. The firm raised its price target and reiterated a constructive stance following the most recent earnings report. However, the broader research mosaic, particularly from more skeptical voices, underscores that the path to realizing bullish scenarios may be narrow and execution dependent.

Bearish Takeaways

Bearish analysts view the recent double digit share price rally as driven by optimism around rare earth prospects and new agreements rather than a proven turnaround in steel margins, creating downside risk if these narratives fail to translate into earnings.
Some target prices have been reset lower or left unchanged despite the stock move, indicating that cautious analysts believe current valuation more than reflects near term spot price improvements and a better 2026 earnings outlook.
Concerns persist over the company’s ability to restore sustainable profitability after multiple quarters of negative gross margins, with skeptics seeing this as evidence of structural pressure on returns and free cash flow generation.
Macro headwinds, including weakening Chinese commodity demand and uncertainty around the depth and duration of any U.S. and European demand rebound, are cited as key risks to both growth expectations and the multiple investors are willing to pay.

What's in the News

EU officials are warning that potential U.S. moves to broaden steel and aluminum tariffs could strain a recent trade agreement and may impact major producers, including Cleveland-Cliffs, if higher duties or tighter quotas are implemented (Bloomberg periodical).
Cleveland-Cliffs named POSCO as its strategic partner under a transformative Memorandum of Understanding that leverages the new U.S. Korea trade agreement. The arrangement aims to expand POSCO's U.S. customer base while aligning with domestic origin and trade rules, with a definitive deal targeted for late 2025 or early 2026 and closing in 2026 (company client announcement).
The company completed a follow on equity offering of approximately $952 million, issuing 75 million common shares at about $12.69 per share to bolster its balance sheet and fund strategic initiatives (company offering disclosure).
Cleveland-Cliffs successfully concluded a production trial with a major automotive OEM showing its exposed steel can replace aluminum using existing aluminum forming equipment. This removes the need for costly retooling and is already transitioning into routine production orders, with additional customer interest emerging (company product announcement).
In its latest buyback tranche update, the company reported no share repurchases in the third quarter of 2025, keeping total completed repurchases under the April 2024 authorization at about 7.5 million shares for $124 million, or roughly 1.6% of shares outstanding (company buyback update).

Valuation Changes

Fair Value Estimate has risen significantly to approximately $8.62 per share from about $6.06, reflecting a higher long term valuation despite softer near term fundamentals.
Discount Rate has edged up slightly to around 10.63% from roughly 10.54%, implying a marginally higher required return for equity holders.
Revenue Growth has fallen sharply in the model to about 0.25% from roughly 4.89%, signaling a more cautious outlook on top line expansion.
Net Profit Margin has been trimmed modestly to about 2.54% from approximately 3.10%, indicating slightly weaker expected profitability levels.
Future P/E multiple has increased meaningfully to roughly 12.1x from about 6.1x, suggesting a greater share of the valuation is now driven by higher expected earnings multiples rather than earnings growth.

Structural shifts toward steel recycling and decarbonization threaten core demand and pricing power, tightening revenue streams and margins.
High capital demands, reliance on legacy assets, and industry disruption risk compressing profitability even as optimization benefits plateau.
Favorable tariffs, domestic production trends, vertical integration, cost optimization, and a premium product focus are strengthening the company's margins, cash flow, and growth prospects.

Catalysts

About Cleveland-Cliffs

Operates as a flat-rolled steel producer in the United States, Canada, and internationally.What are the underlying business or industry changes driving this perspective?

The company's future revenue growth is at risk due to a global push for increased steel recycling and circular economy adoption, which can structurally lower demand for newly-mined iron ore and primary steel-putting persistent pressure on Cleveland-Cliffs' core production volumes and top-line sales.
The accelerating pace of decarbonization and transition away from fossil-fuel infrastructure across North America and globally is expected to dampen long-term demand for traditional steel products, eroding price premiums and resulting in both shrinking revenue streams and lower operating margins.
Cleveland-Cliffs' high capital intensity and aging asset base require continual investment and maintenance, likely compressing free cash flow and net margins over time, especially as cost reductions from optimization initiatives reach their natural limits and large-scale upgrades or relines become unavoidable.
Heavy reliance on domestic automotive manufacturers as a customer base increases exposure to cyclical downturns and technological disruption, particularly from electric vehicle trends that could reduce steel usage per vehicle or shift material needs, potentially driving down both volumes and profitability.
Increasing global electric arc furnace (EAF) capacity and growing international steel overcapacity are expected to intensify price competition, undercutting Cleveland-Cliffs' pricing power and resulting in structurally depressed profit margins even if the U.S. maintains protectionist tariffs in the near term.

Cleveland-Cliffs Earnings and Revenue Growth

Cleveland-Cliffs Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

This narrative explores a more pessimistic perspective on Cleveland-Cliffs compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
The bearish analysts are assuming Cleveland-Cliffs's revenue will grow by 4.9% annually over the next 3 years.
The bearish analysts assume that profit margins will increase from -9.0% today to 3.1% in 3 years time.
The bearish analysts expect earnings to reach $661.2 million (and earnings per share of $1.31) by about September 2028, up from $-1.7 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 6.1x on those 2028 earnings, up from -3.4x today. This future PE is lower than the current PE for the US Metals and Mining industry at 22.5x.
Analysts expect the number of shares outstanding to grow by 0.15% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.54%, as per the Simply Wall St company report.

Cleveland-Cliffs Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent and enforceable Section 232 tariffs on imported steel and vehicles are significantly reducing foreign competition, supporting domestic steel prices and volumes, which could provide long-term revenue and margin tailwinds for Cleveland-Cliffs.
Strong evidence of reshoring trends and OEMs moving automotive production and steel sourcing back to the United States suggest sustained higher steel volumes and improved capacity utilization for Cleveland-Cliffs, potentially lifting earnings and operational leverage.
The company's successful vertical integration, especially after acquiring Stelco and bringing coke production in-house, is driving substantial cost reductions and improving EBITDA margins, positioning Cleveland-Cliffs with lower, more stable input costs and stronger free cash flow.
Ongoing footprint optimization, rigorous cost-cutting, and noncore asset sales are releasing capital and reducing net debt, which is likely to enhance financial flexibility and support long-term profitability.
Cleveland-Cliffs' focus on premium products such as bright annealed stainless steel for high-end automotive and appliance markets, combined with its unique relationships with automotive OEMs, creates opportunities for higher-margin sales and diversified revenue streams, which can support growth in earnings over time.

Valuation

How have all the factors above been brought together to estimate a fair value?

The assumed bearish price target for Cleveland-Cliffs is $6.06, which represents two standard deviations below the consensus price target of $10.86. This valuation is based on what can be assumed as the expectations of Cleveland-Cliffs's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $14.0, and the most bearish reporting a price target of just $5.0.
In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $21.3 billion, earnings will come to $661.2 million, and it would be trading on a PE ratio of 6.1x, assuming you use a discount rate of 10.5%.
Given the current share price of $11.37, the bearish analyst price target of $6.06 is 87.5% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystLowTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystLowTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystLowTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Aging Assets And Global Overcapacity Will Crush Steel Margins