CLF: Future Partnerships And Auto Steel Advances Will Support Upside Momentum

The analyst price target for Cleveland-Cliffs has been lowered slightly, from $12.76 to $12.58. Analysts cite muted revenue growth expectations and continued margin pressures, despite recent volatility in the shares.

Analyst Commentary

Recent analyst reports on Cleveland-Cliffs highlight diverging opinions following the company's latest earnings report and recent share volatility. Views are split between those seeing upside potential and others remaining cautious on the name.

Bullish Takeaways

• Bullish analysts have increased their price targets in response to updated models after the company's Q3 performance. This signals confidence in Cleveland-Cliffs' intermediate-term prospects.
• Some see valuation as attractive after the recent market volatility. There is a view that further gains are possible if operational execution improves.
• Potential gains from rare earth opportunities and partnerships with foreign steel mills are expected to support longer-term growth and may enhance earnings.
• The company's position as a beneficiary of a rebound in U.S. spot steel prices into year end is identified as a favorable catalyst for revenue growth.

Bearish Takeaways

• Bearish analysts note continued negative gross margins over multiple quarters, which raises concerns about the sustainability of any near-term rallies.
• Recent sharp gains in the stock are viewed as driven by market exuberance rather than fundamental improvements. This casts doubt on the durability of the recent outperformance.
• There is skepticism about the impact of recent company announcements. Some analysts see the rally as a potential final move before further downside.
• Valuation is considered stretched in light of ongoing margin pressures and limited evidence of a sustained turnaround. This has prompted downgrades and lower price targets by some observers.

What's in the News

• Canada is expected to remove many retaliatory tariffs on U.S. products. However, it may retain 25% import taxes on U.S. steel and aluminum, which could impact Cleveland-Cliffs and its peers (Bloomberg).
• Cleveland-Cliffs announced a new strategic partnership with POSCO under a Memorandum of Understanding. This partnership strengthens industrial ties between the U.S. and Korea, with a formal agreement expected in late 2025 or early 2026.
• The company completed a successful production trial with a major automotive OEM, demonstrating that Cliffs steel can replace aluminum in auto parts manufacturing without requiring retooling. The company has already moved to routine production and delivery.
• Cleveland-Cliffs recently raised $951.75 million through a follow-on equity offering, issuing 75 million new common shares at $12.69 per share.
• A lawsuit against Cleveland-Cliffs, its executives, and the United Steelworkers was voluntarily dismissed with prejudice. The parties reached a confidential settlement agreement with no financial payment.

Valuation Changes

• Consensus Analyst Price Target has decreased slightly, moving from $12.76 to $12.58.
• Discount Rate has risen from 10.53% to 11.28%, reflecting a modest increase in the perceived risk profile.
• Revenue Growth expectations have decreased marginally, from 6.26% to 6.13%.
• Net Profit Margin forecasts have fallen from 3.13% to 2.77%.
• Future P/E (price-to-earnings ratio) has increased from 12.23x to 14.00x, indicating a higher valuation relative to forecasted earnings.