Even After A 135% Rally, Cleveland-Cliffs Stock Looks Undervalued
Cleveland-Cliffs stock (NYSE: CLF) has seen an impressive rise of 135% in the last six months and now trades at $20 per share. After the stock saw a sharp fall in early 2020 with the outbreak of the coronavirus pandemic leading to a drop in steel prices, the stock has rallied from $8.50 to $20 in the last six months. This rise was driven by a sharp recovery in the global steel prices during this time, as the gradual lifting of lockdowns has led to expectations of faster economic recovery and higher steel demand. Economic stimulus packages announced in the U.S. and other economies are also expected to aid the demand for steel from the construction and automobile sectors. Also, with the lifting of lockdowns, the company’s operations are getting back on track and shipments are likely to rise as supply constraints ease. Shipments will also receive a sharp boost in 2021 following the acquisition of ArcelorMittal’s U.S. operations in late 2020. That the steel industry is slowly getting back on track is clear from the rise in capacity utilization levels. The U.S. raw steel capacity utilization for the week ending 8th May 2021 was 78%, which is significantly higher than the 55.4% recorded in the prior year period, which indicates that there are strong signs of a rebound in activity in the steel sector. Additionally, global iron ore prices have also shot up from $120/ton to $220/ton in the last six months due to expectations of higher demand and stimulus packages.
But will CLF stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely? According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for CLF stock average close to 12.5% in the next three-month (63 trading days) period after experiencing a 135% rise over the previous six-month (126 trading days) period. Notably, though, the stock is likely to outperform the S&P500 over the six months, with an expected return which would be 8.4% higher compared than the S&P500.
But how would these numbers change if you are interested in holding CLF stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test CLF stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!
