Top Wall Street analysts are weighing in on the possibility of the U.S. Steel (X)-Nippon Steel (NISTF) (JP:5401) deal, following President Donald Trump’s support for the agreement. Over the weekend, Trump pointed to a potential partnership between the two steel makers, announcing that “U.S. Steel will remain in America.” X shares jumped 21.2% on May 23 and are trending up 2.2% in pre-market trading, at the time of writing.
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Jefferies Downgrades X Stock to Hold
Jefferies analyst Chris LaFemina downgraded X stock to a “Hold” rating from “Buy,” after Trump announced the possibility of “some form of partnership” between U.S. Steel and Nippon. He also lifted the price target on X stock from $50 to $55, implying 5.8% upside potential from current levels.
The new price target of $55 per share matches the amount Nippon Steel had offered to acquire X stock. The analyst noted that although the details of the partnership remain unclear, the market’s stock price reaction suggests that “a full takeover at $55 per share is likely.”
Morgan Stanley Sees X Stock Heading Toward $55
Simultaneously, Morgan Stanley analyst Carlos De Alba maintained his “Hold” rating on X stock and believes that Trump’s support signals that the proposed acquisition will move forward as a “planned investment.” The analyst expects U.S. Steel stock to move closer toward the offer price and his bull-case scenario of $55 per share.
On the other hand, De Alba estimates that the stock prices of U.S. Steel’s peers, including Cleveland-Cliffs (CLF), Steel Dynamics (STLD), and Nucor (NUE), could be adversely affected by the entry of the world’s fourth-largest steel manufacturer, Nippon Steel, into the U.S. steel market. Nippon has vowed to upgrade U.S. Steel’s existing infrastructure as well as build a new greenfield steel mill. These steps would increase flat steel capacity and put pressure on the American market, with a particularly significant impact on Cleveland-Cliffs.
Is X Stock a Good Buy Now?
On TipRanks, X stock has a Hold consensus rating based on five unanimous Hold ratings. Also, the average United States Steel price target of $44.25 implies 14.9% downside potential from current levels. Year-to-date, X stock has gained 53.4%.
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