Analyst Drives Cliffs Today, but Maintains Cautious Long-Term View

Credit Suisse analyst Nathan Littlewood detailed in his report that Credit Suisse is very bullish in the short term for the coming earnings report but is more cautious on the long term. In fact, Credit Suisse’s call was still an Underperform rating — but with an upside price target of $10.

The bulls could be too much to handle for shortsellers in the near-term, considering that Credit Suisse expects Cliffs to surprise the street with its earnings due to the magnitude of its cost-cutting efforts. In Littlewood’s opinion, Cliffs needs a few strategic initiatives to help it out in the long term. These initiatives include disconnecting or decoupling the Great Lakes Iron Ore pricing from the seaborne market, extending all imminent contract maturities, displacing iron ore imports into the Great Lakes and eliminating the dividend.

As far as what other analysts have been saying, they have been full of downgrades in October:

• Citigroup downgraded Cliffs to a Sell rating from Neutral, and moved the price target down to $5 from $16, on October 20.
• J.P. Morgan downgraded Cliffs to Neutral from Overweight, and lowered the price target to $5 from $18, on October 13.
• Nomura downgraded Cliffs to Reduce from Neutral with a price target of $5, down from $18, on October 3.
• Wells Fargo has an Underperform rating for Cliffs and moved its valuation range down to $4 to $7, on October 1 (see Cliffs Going of the Cliff).

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Shares of Cliffs were trading up almost 7% at $9.13 with one hour left in regular Wednesday trading. The stock has a consensus analyst price target of $10.18 and a 52-week trading range $7.00 to $28.98. The company has a market cap of over $1 billion.