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But Goldman also upgrades Cleveland-Cliffs (NYSE:CLF) to Buy from Neutral with a $24 target, as analyst Emily Chieng says "idiosyncratic opportunities" in the company are underappreciated, and raises Commercial Metals (NYSE:CMC) to Neutral from Sell with a $33 target, citing rela
Yes it will. Company to profitable.
Hedge Funds Are Piling Into Cleveland-Cliffs Inc (CLF)
https://finance.yahoo.com/news/hedge-funds-piling-cleveland-cliffs-154648585.html
Cleveland-Cliffs to Announce Third-Quarter 2021 Earnings Results on October 22
Source: Business Wire
Cleveland-Cliffs Inc. (NYSE: CLF) will announce its third-quarter 2021 earnings results before the U.S. market open on Friday, October 22, 2021.
The Company invites interested parties to listen to a live broadcast of a conference call with securities analysts and institutional investors to discuss the results on October 22, 2021, at 10:00am ET. The call can be accessed at www.clevelandcliffs.com and will also be archived and available for replay at that address.
About Cleveland-Cliffs Inc.
Cleveland-Cliffs is the largest flat-rolled steel producer in North America. Founded in 1847 as a mine operator, Cliffs also is the largest manufacturer of iron ore pellets in North America. The Company is vertically integrated from mined raw materials and direct reduced iron to primary steelmaking and downstream finishing, stamping, tooling, and tubing. The Company serves a diverse range of markets due to its comprehensive offering of flat-rolled steel products and is the largest supplier of steel to the automotive industry in North America. Headquartered in Cleveland, Ohio, Cleveland-Cliffs employs approximately 25,000 people across its mining, steel and downstream manufacturing operations in the United States and Canada. For more information, visit www.clevelandcliffs.com.
?
View source version on businesswire.com: https://www.businesswire.com/news/home/20211001005436/en/
MEDIA CONTACT:
Patricia Persico
Director, Corporate Communications
(216) 694-5316
INVESTOR CONTACT:
James Kerr
Manager, Investor Relations
(216) 694-7719
Cleveland-Cliffs’ New 3-Year Labor Contract with United Auto Workers Ratified at Rockport Works
Source: Business Wire
Cleveland-Cliffs Inc. (NYSE: CLF) announced today that its employees represented by the United Auto Workers (UAW) Local 3044 have ratified a three-year labor contract for its Rockport Works operation. The new contract is effective from October 1, 2021 through September 30, 2024. The new contract will cover approximately 350 UAW-represented workers at Rockport.
Lourenco Goncalves, Chairman, President and CEO, stated, “Our union workforce is at the core of not just what we do but American manufacturing as a whole, and we are pleased to continue our commitment to good-paying middle class jobs with a new labor agreement at Rockport. Our local team at Rockport is committed to the long-term health and success of our Company, our country, and our environment, and as such, we were able to get a deal done that is fair and equitable for both sides.” Mr. Goncalves added, “We embrace our Unions as partners and allow for participation in our success. Our partnership is a powerful one, and with this latest deal, we will maintain our competitive cost structure in flat-rolled steel relative to any of our peers.”
About Cleveland-Cliffs Inc.
Cleveland-Cliffs is the largest flat-rolled steel producer in North America. Founded in 1847 as a mine operator, Cliffs also is the largest manufacturer of iron ore pellets in North America. The Company is vertically integrated from mined raw materials and direct reduced iron to primary steelmaking and downstream finishing, stamping, tooling, and tubing. The Company serves a diverse range of markets due to its comprehensive offering of flat-rolled steel products and is the largest supplier of steel to the automotive industry in North America. Headquartered in Cleveland, Ohio, Cleveland-Cliffs employs approximately 25,000 people across its mining, steel and downstream manufacturing operations in the United States and Canada. For more information, visit www.clevelandcliffs.com.
?
View source version on businesswire.com: https://www.businesswire.com/news/home/20211004005873/en/
MEDIA CONTACT:
Patricia Persico
Director, Corporate Communications
(216) 694-5316
INVESTOR CONTACT:
James Kerr
Manager, Investor Relations
(216) 694-7719
MANUFACTURING | BARRON'S STOCK PICK
5 Stocks to Play the Steel Industry’s Revival
By
Andrew Bary
Oct. 1, 2021 6:48 pm ET
An electric arc furnace at Nucor, which is among the steelmakers that could be worth far more as demand grows.
COURTESY OF NUCOR
The steel industry is enjoying unprecedented prosperity, as steel prices have nearly quadrupled in the past year to $1,900 a ton. Yet steel stocks sport some of the market’s lowest valuations. Leading companies such as Nucor, Cleveland-Cliffs, United States Steel, and Steel Dynamics trade for two to five times 2021 estimated earnings. They could be worth far more as steel demand grows.
https://www.barrons.com/articles/5-steel-stocks-to-play-the-industrys-revival-51633128537
Fitch Upgrades Cleveland-Cliffs Inc.'s IDR to 'BB-'; Outlook Remains Positive
https://www.fitchratings.com/research/corporate-finance/fitch-upgrades-cleveland-cliffs-inc-idr-to-bb-outlook-remains-positive-29-09-2021
Despite a Less Favorable Outlook, Cleveland Cliffs Remains a Buy
https://www.nasdaq.com/articles/despite-a-less-favorable-outlook-cleveland-cliffs-remains-a-buy-2021-09-29
And the shorts are working it.
It's hard to be bearish on the stock market as risk-happy Millennials inherit $2 trillion per year, Fundstrat's Tom Lee says.
https://www.businessinsider.com/stock-market-outlook-tom-lee-fundstrat-millennials-genz-cathie-wood-2021-09?amp
Cleveland-Cliffs Stock Could Be Poised for Fresh Highs
https://finance.yahoo.com/news/cleveland-cliffs-stock-could-poised-152534014.html
Only the weak shorts complain here.
LOL LOL LOL LOL LOL
Love reading all you shorts. You all just hate to see this company grow. See what the close is today.
Was over $20 at open. Learn to read.
Climbing back up tomorrow. Make some $$$ at the open.
Cleveland-Cliffs: NAV Valuation Promises A Huge Upside
https://seekingalpha.com/article/4454691-cleveland-cliffs-nav-valuation-promises-a-huge-upside
Cleveland-Cliffs Stock Is Opportunity Knocking at the Door
9/15/2021 11:56am EDT
Add in the fact that CLF stock earns an A-rating in Portfolio Grader, and there’s a strong case to be made for taking advantage of its current weakness. Now is a good time to add CLF shares to your portfolio.
https://investorplace.com/2021/09/cleveland-cliffs-clf-stock-slide-means-opportunity-knocks/
Hey. How low is the gutter? $20, $22?
From Newsmax - High Steel Prices Challenging Manufacturers, Consumers | Newsmax.com
High Steel Prices Challenging Manufacturers, Consumers | Newsmax.com
https://www.newsmax.com/finance/streettalk/steel-aluminum-prices-manufacturers/2021/09/15/id/1036512/
Elio Motors pivots to 150-mile Elio-E EV, gasoline version still not canceled.
https://www.greencarreports.com/news/1133547_elio-motors-pivots-to-150-mile-elio-e-ev-gasoline-version-still-not-canceled
SEP 14, 2021 3:34 PM EDT
Cleveland-Cliffs Sticks to ‘Self Sufficiency’ Model
https://www.thestreet.com/investing/cleveland-cliffs-sticks-to-self-sufficiency-model
January 2024 Options Now Available For Cleveland-Cliffs (CLF)
PUBLISHED
SEP 13, 2021 12:19PM EDT
January 2024 Options Now Available For Cleveland-Cliffs (CLF) | NASDAQ
Investors in Cleveland-Cliffs Inc (Symbol: CLF saw new options become available today, for the January 2024 expiration. One of the key inputs that goes into the price an option buyer is willing to pay, is the time value, so with 858 days until expiration the newly available contracts represent a possible opportunity for sellers of puts or calls to achieve a higher premium than would be available for the contracts with a closer expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the CLF options chain for the new January 2024 contracts and identified one put and one call contract of particular interest.
The put contract at the $22.00 strike price has a current bid of $5.50. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $22.00, but will also collect the premium, putting the cost basis of the shares at $16.50 (before broker commissions). To an investor already interested in purchasing shares of CLF, that could represent an attractive alternative to paying $22.60/share today.
Because the $22.00 strike represents an approximate 3% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage, there is also the possibility that the put contract would expire worthless. The current analytical data (including greeks and implied greeks suggest the current odds of that happening are 71%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 25.00% return on the cash commitment, or 10.63% annualized — at Stock Options Channel we call this the YieldBoost.
Below is a chart showing the trailing twelve month trading history for Cleveland-Cliffs Inc, and highlighting in green where the $22.00 strike is located relative to that history:
Turning to the calls side of the option chain, the call contract at the $25.00 strike price has a current bid of $5.50. If an investor was to purchase shares of CLF stock at the current price level of $22.60/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $25.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 34.96% if the stock gets called away at the January 2024 expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if CLF shares really soar, which is why looking at the trailing twelve month trading history for Cleveland-Cliffs Inc, as well as studying the business fundamentals becomes important. Below is a chart showing CLF's trailing twelve month trading history, with the $25.00 strike highlighted in red:
Considering the fact that the $25.00 strike represents an approximate 11% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage, there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. The current analytical data (including greeks and implied greeks suggest the current odds of that happening are 35%. On our website under the contract detail page for this contract, Stock Options Channel will track those odds over time to see how they change and publish a chart of those numbers (the trading history of the option contract will also be charted. Should the covered call contract expire worthless, the premium would represent a 24.34% boost of extra return to the investor, or 10.35% annualized, which we refer to as the YieldBoost.
The implied volatility in the put contract example is 87%, while the implied volatility in the call contract example is 81%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today's price of $22.60) to be 68%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.
Cleveland-Cliffs Inc. (CLF) estimates and forecasts
Data shows that the Cleveland-Cliffs Inc. share is performing relatively much better than most of its peers within the same industry. As can be gleaned from the statistics, the company’s share value shot 33.07% over the past 6 months, a 3,358.82% in annual growth rate that is considerably higher than the industry average of 23.00%. Moreover, analysts have looked to higher expectations by upgrading its fiscal year 2021 revenue estimates. The rating firms predict current quarter revenue for Cleveland-Cliffs Inc. will rise 7,300.00%, while the growth in revenue is estimated to hit 5,525.00% for the next quarter. Year-over-year growth is forecast to reach 280.00% up from the last financial year.
https://marketingsentinel.com/2021/09/13/cleveland-cliffs-inc-nyse-clf-could-be-a-life-changing-stock/
30,000 shares insider direct buy. Something going on.
Cleveland-Cliffs: NAV Valuation Promises A Huge Upside
Sep. 11, 2021 4:36 AM ETCleveland-Cliffs Inc. (CLF)1 Comment
Long/Short Equity, Special Situations, Mid-cap
Contributor Since 2021
Quantitative equity research analyst. Colliding data science and finance to find a stock's mispricing.
Constantly looking for a reasonable balance between growth and value.
>5 years of experience in personal portfolio management with an average annualized return of ~29%.
Note: I and Danil Sereda, another Seeking Alpha contributor, worked together and are good friends at the moment, so I have to mention the existing association with him. But we do not influence each other's articles and focus on the analysis of different companies.
Summary
In this article, I've made a Net Asset Value DCF model based on Cleveland-Cliffs' 2P (proven and probable) reserves.
The conservative assumptions of my model promise a huge upside potential to CLF's current price.
I've updated my relative valuation models from recent articles. They are talking about the possible undervaluation of Cliffs, too.
There are a whole host of risks that you should be aware of before going LONG.
Despite that, I continue to hold CLF and am willing to buy more if it corrects a
Introduction
If you read my previous articles on Cleveland-Cliffs Inc. (CLF), you probably know that I was very bullish - and this sentiment really paid off:
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Source: From "3 Reasons Why Cleveland-Cliffs Is A Buy Before The 2Q Report"
However, in previous articles I wrote mostly about the relative valuation of the company - how "fairly" it was trading compared to the peers like United States Steel Corp. (X) or Nucor (NUE), taking into account both market multiples and indicators of business growth and marginality. In this article, I will also update those calculations. But now I'd like to put the main emphasis on a fundamental valuation specific to this particular industry - Net Asset Value (NYSE:NAV) Discounted Cash Flow (NYSE:DCF) modeling.
The idea of this method is pretty simple: we are looking at the company's 2P reserves (proven and probable); we make the assumption that the company no longer explores new mines, but only works with its 2P reserves; we forecast revenue, gross profit, EBITDA and FCFF based on historical dependencies, steel price forecast, trends in business margins, etc. Next, we discount the resulting FCFFs ??at an acceptable WACC (discount rate) and add them up.
The resulting value, by analogy with the classical DCF model, can be compared with the Present Value of Free Cash Flows to the Firm. However, unlike the classical valuation model, after the free cash flow forecasts, there is no terminal value left, since all the mines will run out by the last forecast year. In the end, we have to subtract the current net debt and divide what we got by the number of shares outstanding - that will give us how much the company is really worth based on its free cash flow generation prospects.
So let's value Cleveland-Cliffs
I'd like you to understand straight out the gate that the model I'm about to construct will be fairly simple. It'll be based solely on historical trends and codependencies of financial indicators (for example, the FCFF calculation will come from EBITDA, which in turn will be based on % of revenue). I do this on purpose, because the more parameters I use, the more chances I'll have to "tweak" the final output to meet my primary expectations - I'm a CLF shareholder and, accordingly, an interested person who wants the company to turn out to be undervalued and still investable. Please keep this in mind and treat my findings appropriately.
In 2014, CLF had 4 business segments, including "North American Coal" and "Eastern Canadian Iron Ore". However, since 2015, the company has been actively divesting its non-core assets, focusing exclusively on the "U.S Iron Ore" and "Asia Pacific Iron Ore". In 2018, CLF got rid of the non-American segment, so the company had to completely change its revenue structure - for 2 years (2018-2019) CLF has been reporting on the operating activities of 2 segments: the "Mining and Pelletizing" segment (ex "U.S. Iron Ore") and the "Metallics" segment.
In 2020, due to some acquisition activities, it changed the business structure again and now reports for 4 different segments ("Steelmaking", "Tubular", "Tooling and Stamping", and "European Operations"). All this complicates the analysis of historical trends a little - the rapidly changing business structure forces us to focus on "shorter" average values, which will certainly add risk to the final output. Well, we have no choice but to accept it.
The good news is that despite all the apparent instability in the segment structure, CLF owns the same mines as 5-7 years ago. In its most recent annual report (FY2020), the company stated that its 2P reserves were 2,433 million long tons and its annual production was 17 million long tons of iron ore pellets. In addition, during FY2020 the company produced 4 million tons of raw steel and 1 million net tons of coke.
But let's assume that in the future the company will focus exclusively on iron ore, as it used to. Of course, in reality, this is not the case, but we are trying to value CLF through the value of its net assets, so we need to understand how much it can get from them - it's much easier to do this assuming the extraction and sale of iron ore from existing 2P reserves. In addition, if I take all segments at once, I'll have to take on much more risks - each business segment needs its own selling price forecast.
So, assuming a yearly iron ore production of 20 million long tons (like in normal, pre-crisis FY2019), Cleveland-Cliffs will fully exhaust its 2P iron ore reserves in ~121.5 years. In 2019 and 2020, the average selling prices of 1 tonne of iron ore for CLF were $107 and $114, respectively. In the latest 10-Q, the company does not indicate the selling price of iron ore - this is understandable, because now CLF is a vertically integrated company that extracts, processes, and only then sells the finished product (steel), the sales prices of which it discloses. However, according to the chart by Market Insider, we see that at the moment the price for 1 ton of iron ore is about $135.56 - the result of a fall from >$218 in July 2021:
?Source: From MarketInsider.com
One of Seeking Alpha's users, Krypto, in his calculations, indicated the current (at that time) price of iron ore at $200, however, I think that the average price for the full FY2021 will be ~$160-150 given the current downtrend. After that, I assume that the price will decline to its long-term averages of $90-100. This is quite conservative amid the recent decline in car production - when it comes back to normal ??(which I do not doubt because walking is not what we like to do), iron ore prices may resume their unprecedented growth in the next couple of years.
If with these inputs we assume that COGS will account for ~80% of revenue, and the EBITDA-to-Gross-Profit ratio will be 50%, then even taking into account that FCFFs will be equal to 1% of the resulting EBITDA, the fair value of the company at a 10%-WACC will amount to $23.53 billion, which is more than 2x the current market capitalization of Cliffs.
This is by no means a price/market cap target. The whole point of this calculation is simply to demonstrate how undervalued the company is, even though the stock has soared >274% over the past year, outpacing its main peers:
?Source: Seeking Alpha's charting
All this is happening against the background of multiple contractions - the historical market multiples do not keep pace with the growth of business indicators, the rise of which is regarded by Mr. Market as a temporary phenomenon.
?Data by YCharts
At the very beginning of the article, I promised to update my relative valuation models. Well, they are talking about the possible undervaluation of Cliffs, too:
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??Source: Author's calculations based on Seeking Alpha's data
Again, I have to warn you that these potential upsides are not the final price targets. Anyone reading this article should be aware of the whole galaxy of risk factors that can affect the strength of my bullish thesis.
Firstly, I started building the model, being confident in the stability of the company - otherwise, I would not have owned the stock myself. So if you regard this article as a manifestation of bias and an attempt to justify my initial bullish sentiment, you may be right. But only partly. Fundamentals are hard to argue with. Despite the apparent corporate instability (frequent changes in business segments), CLF proves that the right people are at the helm - the management seems to clearly understand and control the internal processes within the company. As long as the market situation allows, the company reduces leverage and increases liquidity levels, which will be quite useful in the event of a fall in steel prices.
?Data by YCharts
Secondly, my model predicts too many years (actually, 122) and has too many brittle assumptions. Accordingly, the market itself in which the company operates is not as stable as I regard it in my model. That is why I come to such a huge underestimation - Mr. Market apparently does not believe in the stability of the company at more adequate steel prices.
Moreover, I have to make a reservation again - I was valuing Cleveland-Cliffs based on the potential value of its assets, assuming that it would start selling the iron ore again. That is, the conclusion I came to speaks about the value of the mines based on the potential free cash flows from the sale of iron ore (not steel). In reality, the company is now selling steel, not iron ore. Accordingly, I am a priori wrong. However, I have already explained this above - this valuation model explains how much, in theory, a company should be worth based on the value of its assets. The main thing is that CLF hypothetically has such a possibility, that's why I think my calculations do make sense.
Thirdly, the company's margins are still lame. In my model, I based the FCFF forecast from EBITDA at the level of 2% (which is quite small), but CLF in the context of the last 12 months shows much worse results, even compared to its peers:
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Source: Author's calculations based on Seeking Alpha's data
Moreover, the marginality gap inevitably leads to relative overvaluation if we change our focus:
?Source: Author's calculations
But despite all the risks, I believe that Cleveland-Cliffs has room to grow even with last year's stock rally. Yes, CLF has a lame marginality, but this is not a problem, because even under quite conservative assumptions, the stock does not cease to remain fundamentally undervalued. This is confirmed when we match the growth of its business with dependent market multiples - in this regard, the company is still trading at a large discount to its main peers. Therefore, based on a combination of factors, I continue to hold CLF and am willing to buy more if it corrects a little.
This article was written by
Oakoff Investments
1.07K Followers
Following
Quantitative equity research analyst. Colliding data science and finance to find a stock's mispricing.Const... more
Long/Short Equity, Special Situations, Mid-cap
Contributor Since 2021
Quantitative equity research analyst. Colliding data science and finance to find a stock's mispricing.
Constantly looking for a reasonable balance between growth and value.
>5 years of experience in personal portfolio management with an average annualized return of ~29%.
Note: I and Danil Sereda, another Seeking Alpha contributor, worked together and are good friends at the moment, so I have to mention the existing association with him. But we do not influence each other's articles and focus on the analysis of different companies.
Disclosure: I/we have a beneficial long position in the shares of CLF either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Elio Motors Announces Elio-E, the Electric Version of Its Non-Existent Three-Wheeler
11 Sep 2021, 05:45 UTC · By Elena Gorgan
https://www.autoevolution.com/news/elio-motors-announces-elio-e-the-electric-version-of-its-non-existent-three-wheeler-169141.html
Almosthere the shorter is back. How much did you loose here anyway.
Elio Motors announces electric vehicle production in Shreveport
By VICKIE WELBORN, KTBS TV
3 hrs ago
SHREVEPORT, La. -- Elio Motors apparently has emerged from several years of silence about status of its three-wheeled vehicle by announcing Thursday it intends to build an electric version at its Shreveport production site.
The announcement is based on the change in consumer demand and finance markets’ new appetite for electric vehicles, a company news release states.
The Elio-E model has a targeted base at $14,900, "making it the most affordable entry level electric vehicle on the market," according to the release.
CEO Paul Elio said the plant in Shreveport -- the vacant General Motors facility -- is still under lease and all of the "critical" manufacturing equipment is still in place.
The news release does not provide any information about when production would begin or how many Elio plans to employ.
The last time Elio talked about plans for his three-wheeled car was in May 2018. He still promised a launch of what was then a three-wheeled gas-powered car.
Elio was criticized for multiple delays in the project that lasted over several years. He continued to pledge production would get underway even though financial reports showed he burned through millions of dollars in investor money.
His initial plans were to be in production by 2015 with 1,500 people on the payroll.
The Caddo Parish Commission owns the GM building, having purchased it in 2014 with the hopes of luring a major manufacturer to town.
“We never quit working to make this dream happen,” Elio said today in his news release. “The market has changed, and investors and consumers are looking for innovative, environmentally conscious, low cost electric vehicles, and we have a great option that will appeal to a very large under-served market”.
-----
About Elio: Founded by car enthusiast Paul Elio, Elio Motors Inc. represents a revolutionary approach to manufacturing low cost electric and gas powered vehicles. The three-wheel electric Elio is engineered to be the ultimate low cost commuter and fleet vehicle while providing the comfort of amenities. The Elio will be nicely equipped with power windows, power door locks, air conditioning and cruise control, accompanied by the safety of multiple air-bags and an aerodynamic, enclosed vehicle body. Elio’s first manufacturing site will be in Shreveport, Louisiana.
MAD MONEY
Cleveland-Cliffs CEO says offering a bonus to get Covid vaccine helped increase worker uptake
PUBLISHED WED, SEP 8 2021 6:37
PM EDT
https://www.cnbc.com/2021/09/08/covid-vaccine-cleveland-cliffs-ceo-says-offering-workers-a-bonus-increased-uptake.html
Same here. Elio got my $100. How about the people who put down $1000.
Funny thing is that Sondors was putting out a 3 wheeled electric car, but now their doing electric motorcycles on top of there electric bicycles.
Wonder if I'll ever see my Sondors electric car. At least my Sondors $100 deposit is refundable. LOL Like my Tesla Cybertruck deposit.
https://sondorsx.com/
Is Mr. ELIO still pulling his $250k yearly salary from this company like when he started Elio Motors?
Cleveland-Cliffs Merits an Updated Strategy Based on Its Charts
A potential correction could provide a buying opportunity for longer-term investors in the producer of steel and iron ore.
ByBRUCE KAMICH
Sep 09, 2021 | 08:33 AM EDT
https://realmoney.thestreet.com/investing/stocks/cleveland-cliffs-merits-an-updated-strategy-based-on-its-charts-15763849
Haha Haha. What a joke
This company has no $$$$$.
ELIO : Elio Motors, Inc.
SEC CIK 0001531266
Ticker: ELIO
DescriptionNo Documents - 2021-09-08 05:26:18 pm
© 2021 SEC.report
SEC CFR Title 17 of the Code of Federal Regulations.
Cleveland-Cliffs Investors, Set Your Sights on $31
9/8/2021 9:18am EDT
By Mark R. Hake, CFA
Cleveland-Cliffs (NYSE:CLF) is now not just an iron-ore producer but a vertically integrated steel producer. It produced a stellar second-quarter earnings report. As a result, CLF stock now has a good chance of rising to $31.28, up 31% from $23.91 as of Friday’s close.
Source: Pavel Kapysh / Shutterstock.com
The main reason I have to come to this conclusion is that Cleveland-Cliffs just reported its first quarter of free cash flow (FCF) in a little while. This is the main reason why the company will be able to lower its debt and increase its value over the next year.
Estimating Cleveland-Cliffs FCF
On July 22, the company announced its Q2 revenues of $5.045 billion, up from $1.093 billion a year earlier. Since then, the company acquired two steel producers and it is now the largest flat-rolled steel producer in the entirety of North America. Since CLF also produces its own iron ore, it was able to lower its steel-making costs quite significantly.
As a result, the company produced adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $1.36 billion in the quarter and $1.873 billion in the first six months of 2021. However, Cleveland-Cliffs produced $349 million in positive free cash flow (FCF) during Q2. This was the first time it has done this since September 2020, according to Seeking Alpha‘s page on the company’s cash flows.
This might be a little hard to see at first, given that the company did not specifically state its Q2 FCF performance. In fact, the six months Statement of Unaudited Condensed Consolidated Cash Flows shows that net cash provided by operating activities was just positive $132 million. And after deducting capex charges of $298 million, the six months FCF was actually negative $166 million. Pip
So how can I say that the company made a positive $349 million in FCF? The answer is that this was the Q2 FCF performance.Q1 had a much higher negative FCF number, which can be seen in their Q1 earnings release. The difference with a much greater negative number (i.e., -$515 million) and a lower negative number (-$166 million) is positive $349 million. That means that Q2 had positive FCF.
Moreover, the $349 million in Q2 FCF represents 6.9% of the $5.045 billion in sales it made during the quarter. Analysts now project that the company will make $20.35 billion this year and $18.49 billion next year. So on average, its run rate revenue for the next 12 months will be $19.42 billion. If we multiply 6.9% to this number, the forecast FCF will be $1.34 billion over the next 12 months.
We can use that FCF estimate to value CLF stock.
What CLF Stock Is Worth
For example, if we use a 10% FCF yield to value CLF stock, its value works out to $13.4 billion. This represents a potential upside of 12.1% for the stock, putting it on a price of $26.80 per share, or 12.1% over its price today (Sept. 3) of $23.91 per share.
Moreover, given that the company could begin making positive FCF, the market is likely to give it a higher valuation with the FCF yield metric. That means the FCF yield number will be lower. So, for example, if we use a 7.5% FCF yield, Cleveland-Cliffs stock will have a value of $17.87 billion. That represents an upside of 49.55% or $35.76 per share.
So, on average we can estimate that CLF could be worth between $26.80 and $35.76 per share, or $31.28 per share. That represents an upside of 30.8% over today’s price of $23.91 (Sept. 3).
What Analysts Think
Analysts tend to agree with me. For example, Refinitiv‘s survey of eight analysts, as published by Yahoo! Finance, shows that their average 12-month price target is $29.59. Moreover, TipRanks.com indicates that six analysts who have written up CLF stock in the last three months have an average target of $30.89. This represents a potential upside of over 29% and is close to my target price of $31.28 per share.
The fact is the company is now producing significant amounts of free cash flow and it might not be completely apparent to investors. This is because its Cash Flow statement still shows negative free cash flow on a cumulative basis, given that Q1 had negative FCF.
Moreover, analysts are somewhat leery that the company will be able to obtain high prices as it did during Q2. For example, its price per net ton of steel averaged rose from $900 in Q1 to $1,118 in Q2.
However, even if prices decline a bit, the company might be able to sell larger amounts of steel. For example, even with higher prices, its total volume rose 1.5% from 4,144 net tons to 4,205 in Q2. In addition, CLF was also able to significantly increase its average EBITDA margin by lowering its costs. In Q1, its adjusted EBITDA margin was 12.67% and by Q2 it had jumped to 25.9%. This leaves plenty of room for the company to make profits even if prices fall.
What to Do With CLF Stock
So now might be a good time to take an initial stake in CLF stock, given that it has just turned FCF positive. Keep in mind that even if revenue falls over the next year, the stock could still rise as investors appreciate its powerful FCF performance.
In fact, I suspect that over the next year, FCF will turn positive for four quarters. That will likely raise CLF stock’s valuation to $31.28 per share, or 31% higher.
On the date of publication, Mark R. Hake did not hold any position, directly or indirectly, in any of the securities mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
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https://investorplace.com/2021/09/clf-stock-is-likely-to-climb-this-year-as-its-free-cash-flow-has-become-substantially-positive/
After hours went to $1.14.
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Insider. Direct buy.
Statement of Changes in Beneficial Ownership (4)
Source: Edgar (US Regulatory)
FORM 4 [ ] Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF SECURITIES
OMB APPROVAL
OMB Number: 3235-0287
Estimated average burden
hours per response... 0.5
Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934 or Section 30(h) of the Investment Company Act of 1940
1. Name and Address of Reporting Person *
DRISCOLL FREDERICK W2. Issuer Name and Ticker or Trading Symbol
Cellectar Biosciences, Inc. [ CLRB ]5. Relationship of Reporting Person(s) to Issuer (Check all applicable)
__X__ Director _____ 10% Owner
_____ Officer (give title below) _____ Other (specify below)
(Last) (First) (Middle)
C/O CELLECTAR BIOSCIENCES, INC., 100 CAMPUS DRIVE3. Date of Earliest Transaction (MM/DD/YYYY)
9/3/2021(Street)
FLORHAM PARK, NJ 07932(City) (State) (Zip)4. If Amendment, Date Original Filed (MM/DD/YYYY)
6. Individual or Joint/Group Filing (Check Applicable Line)
_X _ Form filed by One Reporting Person
___ Form filed by More than One Reporting Person
Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned1.Title of Security
(Instr. 3)2. Trans. Date2A. Deemed Execution Date, if any3. Trans. Code
(Instr. 8)4. Securities Acquired (A) or Disposed of (D)
(Instr. 3, 4 and 5)5. Amount of Securities Beneficially Owned Following Reported Transaction(s)
(Instr. 3 and 4)6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)7. Nature of Indirect Beneficial Ownership (Instr. 4)CodeVAmount(A) or (D)PriceCommon Stock 9/3/2021 P 19417 A$1.0426 19417 D
Table II - Derivative Securities Beneficially Owned (e.g., puts, calls, warrants, options, convertible securities)1. Title of Derivate Security
(Instr. 3)2. Conversion or Exercise Price of Derivative Security3. Trans. Date3A. Deemed Execution Date, if any4. Trans. Code
(Instr. 8)5. Number of Derivative Securities Acquired (A) or Disposed of (D)
(Instr. 3, 4 and 5)6. Date Exercisable and Expiration Date7. Title and Amount of Securities Underlying Derivative Security
(Instr. 3 and 4)8. Price of Derivative Security
(Instr. 5)9. Number of derivative Securities Beneficially Owned Following Reported Transaction(s) (Instr. 4)10. Ownership Form of Derivative Security: Direct (D) or Indirect (I) (Instr. 4)11. Nature of Indirect Beneficial Ownership (Instr. 4)CodeV(A)(D)Date ExercisableExpiration DateTitleAmount or Number of Shares
Explanation of Responses:
Reporting Owners
Reporting Owner Name / AddressRelationshipsDirector10% OwnerOfficerOtherDRISCOLL FREDERICK W
C/O CELLECTAR BIOSCIENCES, INC.
100 CAMPUS DRIVE
FLORHAM PARK, NJ 07932X
Signatures
/s/ Christina Blakley, attorney-in-fact for Frederick Driscoll9/7/2021**Signature of Reporting PersonDate
Cleveland-Cliffs Inc. – Consensus Indicates Potential 22.0% Upside
https://www.directorstalkinterviews.com/cleveland-cliffs-inc.---consensus-indicates-potential-22.0-upside/4121021137