Steelmaker Cleveland-Cliffs (NYSE:CLF) saw its shares fall in today’s trading after J.P. Morgan downgraded the stock from Buy to Hold and cut its price target from $23 to $17. The downgrade is mainly due to:
- A lower price forecast for value-added and plate steel.
- Increasing capital spending needs until 2028.
- A lack of near-term growth compared to other steelmakers.
This will likely lead to lower free cash flow figures compared to what was previously expected. It’s worth noting that analyst Bill Peterson does believe Cleveland-Cliffs is performing well despite a tough environment and has good mid-to-long-term opportunities. However, he sees potential downside risk for Q2 estimates and is worried about investor reactions to more debt-funded buybacks.
Peterson also noted that while buybacks are a priority, they may be reduced moving forward, as investors seem to favor a growing cash pile for possible M&A deals. CLF previously announced a $1.5 billion share repurchase plan after buying back over $600 million worth of shares in the most recent quarter. This was a huge jump compared to the previous quarters, as indicated in the image below:
Is CLF Stock a Buy or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on CLF stock based on two Buys, six Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 26% year-to-date decline, the average CLF price target of $19.14 per share implies 27.18% upside potential.
