The firm also increased its price target to $6.25 from $5.50 on shares of the West Chester, OH-based steel producer.
"As domestic U.S. steel prices find a floor and global markets benefit from emerging raw materials-led reflation, prospects for the U.S. steel market have notably improved," Jefferies wrote in an analyst note earlier today.
"With AKS reporting materially improved cost control in Q3 and with balance sheet risks increasingly addressed, we see attractive upside into 2017," the firm added.
Earlier this week, AK Steel posted earnings that beat Wall Street's expectations for the 2016 third quarter.
While Jefferies began 2016 with significant concerns over the state of the company's balance sheet, the situation has "dramatically changed."
"AKS has opportunistically raised capital twice year-to-date including $305 million this week (at $4.90/sh). While dilutive, these are necessary steps for any highly indebted company in a cyclical industry and have now largely de-risked AKS' balance sheet," the firm noted.
Separately, TheStreet Ratings Team has a "Sell" rating with a score of D on the stock.
This is driven by several weaknesses, which should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks covered.
Among the areas that are negative, one of the most important has been poor profit margins.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: AKS