Wells Fargo upgraded Cleveland-Cliffs to Overweight from Equal Weight on Tuesday, raising its price target to $14 from $12. The bank argued that Wall Street is systematically underestimating the steelmaker’s 2027 earnings potential.
Shares climbed 5.1% in pre-market trading, signaling significant upside toward the new target.
The bullish call centers on a projected $2.65 billion in 2027 EBITDA. According to Wells Fargo analyst Timna Tanners, this figure materially exceeds FactSet consensus, even factoring in a potential drop in benchmark U.S. hot-rolled coil (HRC) prices.
"We upgrade CLF... reflecting our view that H2E and 2027E EBITDA can materially exceed FactSet consensus, even assuming benchmark HRC prices normalize to ~$1,000/st from recent levels near $1,250/st," Tanners wrote in the upgrade note. The $14 target is based on an unchanged 6x 2027 EV/EBITDA multiple, which aligns with historical U.S. blast furnace peers.
Tanners’s bull case rests on three compounding EBITDA tailwinds that she believes consensus has failed to model:
The Stelco Bridge: Canadian HRC prices at Cliffs’ Stelco operations have surged to roughly $1,100 per short ton (from under $700) since the company outlined its original $500+ million annualized Stelco EBITDA bridge. Wells Fargo estimates this price surge creates an incremental $800 million annualized benefit. By contrast, FactSet consensus models only a $700 million year-over-year increase for 2027, severely under-reflecting this advantage.
Fixed-Price Contract Repricing: Tanners sees $500 million of additional opportunity in 2027 from repricing roughly 2 million tons per year of open fixed-price contracts. Supported by a tight market and the current 50% Section 232 tariff on steel imports, she estimates achievable premiums of $250 per ton on these volumes.
CRU-Linked Contract Volumes: A third lever involves roughly 6 million tons per year of CRU-linked contracts. Wells Fargo models an additional $240 million EBITDA benefit if discounts settle approximately four percentage points below 2026 levels.
Together, these drivers underpin the $2.65 billion EBITDA estimate, which Wells Fargo projects would generate roughly $560 million in free cash flow. Crucially, this would drive Cliffs’ net leverage down to 2.6x—a massive improvement from the punishing 15.2x recorded in the second quarter.