Citigroup initiated coverage on the outperforming mining stock
Citigroup initiated coverage on Cleveland-Cliffs Inc (NYSE:CLF) with a "buy" rating and an $11 price target -- representing expected upside of almost 33% to last night's close, and a move into territory not seen since March 2017. In reaction, CLF stock is trading up 2.9% out of the gate at $8.53.
The mining shares have been rallying hard since their late-March lows near $6.40, up more than 33%, and guided higher by its 20-day moving average. In early May, the shares gapped above former resistance in the $8 region, and are now boasting an 18.3% year-to-date gain.
Plenty of options traders are betting on the $8 region -- which contained CLF rally attempts in February, March, and April. Specifically, the July 8 put has seen the biggest increase in open interest over the past two weeks, with almost 15,500 contracts added -- and data from the major options exchanges confirms significant sell-to-open activity here.
Elsewhere on Wall Street, though, there's plenty of skepticism priced into the outperforming shares. Even though short interest declined 11% in the most recent reporting period, there are still 36.65 million CLF shares dedicated to these bearish bets -- representing a healthy 12.5% of the stock's available float, or four days' worth of pent-up buying demand, at the average pace of trading.
Plus, half of the analysts covering CLF stock maintain a lukewarm "hold" rating, while the average 12-month price target of $9.44 is an 11% premium to current trading levels. Should Cleveland-Cliffs continue to climb up the charts, an extended round of short-covering and/or bullish analyst attention could create even bigger tailwinds.