Cleveland-Cliffs: Strategic Moves and Challenges Justify Hold Rating Amid Debt Concerns and Market Uncertainties

J.P. Morgan analyst Bill Peterson maintained a Hold rating on Cleveland-Cliffs today and set a price target of $7.50.

Bill Peterson has given his Hold rating due to a combination of factors influencing Cleveland-Cliffs’ current and future financial performance. On the positive side, the company’s strategic moves such as shutting down loss-making assets and benefiting from protectionist measures have helped maintain a profitable price floor. These actions, along with anticipated cost savings from lower coal contract pricing, are expected to contribute to modest free cash flow generation in the second half of the year, which could help reduce the company’s elevated debt levels.
However, there are significant challenges that temper the outlook. The persistently low Brazilian slab prices pose a risk to the Calvert slab agreement, and the reshoring of auto capacity is expected to take time, potentially impacting the company’s core auto market exposure. Additionally, the company’s debt remains a concern, especially with rising capital expenditure requirements. These factors, combined with trade uncertainties and recent stock outperformance, suggest that a more favorable entry point may be necessary, justifying the Hold rating.

Based on the recent corporate insider activity of 36 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of CLF in relation to earlier this year.