Asia FX dithers as dollar steadies before Powell speech; yen muted after CPI data
On Wednesday, GLJ Research issued a downgrade for Cleveland-Cliffs (NYSE:CLF) shares, moving its recommendation from Buy to Sell and adjusting the year-end price target to $3.91 from a higher previous target. This revision follows a period of strategic decisions by the company that the research firm now views as missteps. The stock, currently trading at $6.38, has already declined 32% year-to-date and sits near its 52-week low of $6.04.
The downgrade was prompted by a significant increase in Cleveland-Cliffs’ debt in the first quarter of 2025, which has pushed the company’s leverage ratio close to 40 times. GLJ Research attributes this surge in leverage primarily to a series of acquisitions that they now regard as ill-advised. InvestingPro data shows the company’s total debt stands at $7.62 billion, with a concerning debt-to-capital ratio of 0.69.
Additionally, the firm notes that the fundamentals of the U.S. steel industry are rapidly deteriorating, which is particularly detrimental to Cleveland-Cliffs. The industry’s weakening position is further compounded by Cleveland-Cliffs’ recent losses in market share. The company’s revenue has declined 15% over the last twelve months, and InvestingPro analysis indicates an overall WEAK financial health score.
GLJ Research expressed regret over its prior upgrade to a Buy rating, describing it as an "embarrassing mistake." The analyst’s commentary highlighted the confluence of the company’s increased leverage, the faltering steel industry, and the loss of market share as key factors leading to the revised Sell rating and lower price target.
Investors are now faced with a new valuation for Cleveland-Cliffs shares as the market reacts to the updated research and analysis from GLJ Research. The new price target of $3.91 reflects a significant reassessment of the company’s prospects in the current industry climate.
In other recent news, Cleveland-Cliffs Inc. reported a significant earnings miss for the first quarter of 2025. The company posted an earnings per share (EPS) of -$0.92, falling short of the forecasted -$0.67, while revenue came in at $4.63 billion, just below the expected $4.68 billion. This earnings miss comes amidst Cleveland-Cliffs’ ongoing efforts to streamline operations and improve profitability, including idling non-core assets and signing new contracts with automotive manufacturers. Additionally, S&P Global Ratings revised Cleveland-Cliffs’ credit outlook to negative, maintaining a ’BB-’ issuer credit rating due to weaker earnings and cash flows, which were impacted by high debt levels following the Stelco (TSX:STLC) acquisition.
Cleveland-Cliffs has been actively working to regain its footing, with plans to restart its C6 blast furnace to meet rising automotive steel demand. The company expects improved EBITDA in the second half of 2025, driven by cost savings and higher selling prices. Shareholders recently approved executive compensation and re-elected the board of directors, signaling strong support for the company’s leadership. Deloitte & Touche LLP was also ratified as the independent accounting firm for 2025. Despite the challenges, Cleveland-Cliffs remains optimistic about its strategic positioning in the automotive steel market.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.