Iron ore has been in a "state of structural oversupply" for several years, as prices have fallen 19% year-over-year and dropped 39% in 2015 alone, the firm wrote in a note, Barron's reports. Axiom Capital anticipates that supply will grow further, given higher production at Vale (VALE)and Samarco.
Based on the 2016 guidance provided by Cliffs Natural Resources, a Cleveland-based iron ore supplier, the company will likely generate about $250 million in EBITDA vs. costs of roughly $305 million, Axiom Capital estimates.
"At this point, we believe the shares would have little more than option value around a possible debt restructuring," the firm said.
The firm consequently maintained its $2 price target on the stock.
Separately, TheStreet Ratings team rates the stock as a "sell" with a ratings score of D.
Cliffs Natural Resources's weaknesses include its feeble growth in its earnings per share, poor profit margins and generally disappointing historical performance in the stock itself.
You can view the full analysis from the report here: CLF
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 article's author.