Why Cleveland-Cliffs Stock Is Surging Today

Cleveland-Cliffs Inc CLF shares are trading higher Thursday following an upgrade from Morgan Stanley. 

What Happened: Morgan Stanley analyst Carlos De Alba upgraded Cleveland-Cliffs from Equal-Weight to Overweight and raised the price target from $13.60 to $26, citing an increase in free cash flow ahead on the back of new fixed price contracts.

"We believe the recently announced increase in fixed annual steel price contracts should allow CLF to cope with lower forecast spot steel prices and generate robust FCF yields in the coming years as the company has no major planned capital expenditures," the analyst wrote in a new note to clients.

De Alba believes sell-side analysts are underestimating the increase in annual fixed price contracts. The Morgan Stanley analyst expects such to lead to positive earnings revisions this year, which should help drive share prices higher. 

"We believe a near-term catalyst for the stock will be the release of 4Q22 earnings, as historically the company provides guidance for their expected average selling price for the year. This should provide further clarity and greater confidence to the market on the impact of the increase in the annual fixed price contracts," De Alba said.

Related Link: Cleveland-Cliffs Gets Upgraded: Why This Analyst Is Raising The Price Target Ahead Of Q4 Earnings

CLF Price Action: Cleveland-Cliffs has a 52-week high of $34.04 and a 52-week low of $11.83.

The stock was up 7.72% at $20.72 at time of publication, according to Benzinga Pro.

Photo: THAM YUAN YUAN from Pixabay.