Shares of the Cleveland company have wavered on Thursday. At last check the stock was off 1.7% at $22.82. It had traded up as much as 6.7% at a 52-week high $24.77.
Analyst Gordon Johnson, who raised his price target to $28.35 from $22.09, said in a research note that at current prices for US HRC, referring to the Hardness Rockwell C scale, "we could see strong upside potential to CLF's valuation." Those prices appear sustainable, he said.
Spot-market steel prices have climbed more than 60% this year to more than $1,600 a ton, The Wall Street Journal reported, citing data from S&P Global Platts.
Johnson, who keeps a buy rating on the shares, said that "the market is still very clearly tight, with market participants quoted as saying buyers still cannot find a mill willing to accept a spot order."
Johnson said he saw a scenario where record prices are sustained through 2021 into 2022.
"Under that backdrop," he said, "should markets extrapolate record high HRC prices and apply what could be described as a mid-cycle multiple to spot assumptions, we see a sizable evaluation higher in CLF's share price as fated."
Whichever way market prices go over the next couple of quarters, the analyst said, "we do not think investors have much to worry about as it relates to incoming U.S. steel capacity."
The analyst said that "coming US steel capacity is really not much after stripping out value-added lines and idled plants."
Cleveland-Cliffs surged Wednesday as the company was caught up in the meme-stock craze.
A forum on Reddit channel WallStreetBets claims the company is being shorted and that it is undervalued at a time when steel prices are rising and there are long wait times for big steel orders due to shortages.
In April, the company swung to a first-quarter profit on a tenfold increase in revenue.