On Thursday, GLJ Research upgraded shares of Cleveland-Cliffs (NYSE:CLF) to a Buy rating, maintaining its price target at $27.20. The firm's decision to raise the stock from a Sell rating is based on several factors, including what it describes as the "Trump Put" and "Biden Put," as well as an anticipated shift from technology to value stocks, which includes steel stocks like Cleveland-Cliffs.
The S&P 500 has seen a year-to-date increase of 10.0%, compared to Cleveland-Cliffs' 8.4% rise over the same period, indicating that CLF has slightly underperformed. The tech-heavy NASDAQ 100 has surged by 68% since January 1, 2023, while the Dow Jones Industrial Average has seen a more modest increase of 20%, highlighting the differential in sector performance.
GLJ Research's upgrade comes amidst expectations of a rotation from technology into value stocks as interest rates are projected to rise in 2024. The firm also notes key updates to its steel price forecasts and adjustments to its earnings driver model for Cleveland-Cliffs. Despite a year-to-date drop of 26.5% in US Hot-Rolled Coil (HRC) steel prices, Cleveland-Cliffs' stock has climbed by 8.4%, suggesting that investors may be looking beyond immediate fundamentals and showing confidence in the steel sector's prospects.
The firm's outlook includes an analysis of the political landscape as the United States moves closer to the presidential election later this year. Analysts believe that both potential election outcomes provide a supportive backdrop for the steel industry. This perspective, combined with the firm's revised earnings expectations for Cleveland-Cliffs, underpins the rationale for the upgrade in the stock's rating.
In conclusion, GLJ Research anticipates that investors will increasingly favor U.S. steel stocks, especially those that have underperformed, throughout 2024. The maintained price target of $27.20 per share represents a 22.9% upside from Wednesday's closing price, signaling confidence in Cleveland-Cliffs' potential for growth.