Why Cliffs Natural Resources (CLF) Stock Is Spiking Today
NEW YORK (TheStreet) -- Shares of Cliffs Natural Resources (CLF) - Get Report are soaring by 36.81% to $4.20 in early-morning trading on Tuesday, after JPMorgan upgraded shares to "overweight" from "neutral."
The firm reinstated a price target of $7 on the stock.
The iron ore producer has "significantly higher near-term earnings growth," as rising steel prices should result in higher realized pellet prices for the rest of 2016, JPMorgan wrote in a note.
Management's forecast assumes a hot-rolled coil price of $450 per ton vs. the current spot of $610 per ton, the firm noted.
Additionally, JPMorgan is "confident" that the pellet supply contracts with ArcelorMittal (MT), which is Cliffs's largest customer, will be "renewed favorably for both parties and is not a major overhang as many have suggested."
Indeed, earlier today Cliffs announced that it has entered into a new long-term iron ore supply agreement through 2026 with ArcelorMittal.
"With a 37% short interest in the stock, we think that these positive merits are underappreciated by the market and the risk is skewed to the upside in the near term," JPMorgan contended.
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.
