Tuesday, GLJ Research analyst Gordon Johnson upgraded shares of Cleveland-Cliffs (NYSE:CLF) from Sell to Buy, setting a price target of $14.27. The upgrade comes as the stock trades at $9.9, having declined 36.7% over the past six months.
The upgrade was based on expectations of the implementation of tariffs by the incoming Trump administration and typical seasonal strength in the steel sector. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics.
Johnson pointed out the potential for U.S. steel stocks to benefit from what he referred to as the "Trump Put," in anticipation of President-elect Trump's inauguration on January 20, 2025, and his likely pro-tariff policies. These policies are expected to be applied to various industries, including steel, which may drive up U.S. Hot-Rolled Coil (HRC) prices in the near term.
With a beta of 1.96, Cleveland-Cliffs has shown significant price sensitivity to market movements, trading between $8.99 and $22.97 over the past 52 weeks.
The analyst also highlighted the historical seasonal trends that favor the steel industry from January to April. According to Johnson, this period tends to show positive performance for the sector and Cleveland-Cliffs' stock in particular.
In his note, Johnson raised the question of whether it is an opportune time to invest in U.S. steel stocks, given the potential economic policies of the upcoming Trump administration and the positive seasonality observed in the sector.
The new price target of $14.27 per share implies a significant upside from the stock's closing price the day before the upgrade. Johnson's analysis suggests that the combined effect of expected tariffs and seasonal trends could lead to a favorable outcome for Cleveland-Cliffs' stock value in the short term.
For a comprehensive analysis of Cleveland-Cliffs' valuation and growth prospects, investors can access detailed Pro Research Reports and additional insights through InvestingPro, which covers over 1,400 US stocks with in-depth financial analysis and expert recommendations.
In other recent news, Cleveland-Cliffs Inc. disclosed its third-quarter 2024 financial results, revealing an adjusted EBITDA of $124 million due to a dip in steel demand. The company, however, anticipates a rise in automotive demand and stable pricing in the first quarter of 2025, coupled with significant cost savings from improved coal contracts and operational efficiencies.
The strategic acquisition of Stelco (TSX:STLC) is also expected to yield $120 million in cost synergies in the first year and enhance EBITDA margins.
Furthermore, Cleveland-Cliffs announced the appointment of Jane M. Cronin to its Board of Directors. Cronin, meeting the New York Stock Exchange’s director independence standards, is expected to bring new insights to the board's operations. Cleveland-Cliffs plans to enter into an indemnification agreement with Cronin, designed to indemnify her against potential expenses and liabilities arising from her directorship duties.
These recent developments highlight Cleveland-Cliffs' commitment to strong corporate governance and strategic growth. The company has strategic projects in the pipeline, including the Middletown and Weirton projects, with expected operational dates in late 2026 and late 2025, respectively.
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