Steel Stock Plummets on Dismal Quarterly Outlook

The equity looks overdue for a round of price-target cuts

Digital Content Manager
Dec 17, 2021 at 10:25 AM
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United States Steel Corporation (NYSE:X) is down 4.5% at $22.40 this morning, after its current-quarter forecast of $1.65 billion missed Wall Street's estimates. The company is expected to experience a temporary slowdown of order activity, with higher costs and cautious buying counteracting the price of steel.

The security has been all over the place this year, though shares seem to have recently found their footing at the $22 level, after attempting to rally towards the $28.50 mark in November. X did notch an Aug. 18, three-year high of $30.57, though, and is up 33% year-to-date.

Analysts are bearish towards the equity, with four of the six in coverage calling it a tepid "hold" or worse. Meanwhile, the 12-month consensus target price of $32.60 is a 45.5% premium to current levels, meaning X may be overdue for a round of price-target cuts.

Though short interest is declining, down 18.4% in the last two reporting periods, shorts are still in control. Specifically, the 39.50 million shares sold short account for 14.8% of X's available float. 

The options pits also lean bearish. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security sports a 10-day put/call volume ratio that is higher than 97% of annual readings, implying puts are getting picked up at a much quicker-than-usual clip.  

Now may be a good opportunity to weigh in on United States Steel stock's next move with options. This is per its Schaeffer's Volatility Index (SVI) of 56%, which stands higher than just 15% of readings from the past year. In other words, options players are pricing in low volatility expectations for X.

It's also worth noting the equity's Schaeffer's Volatility Scorecard (SVS) sits at 93 out of 100. This means the stock has exceeded options traders' volatility expectations in the past year.

 




 
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