US Steel (X) PT Raised to 'Street High' $39.55 at GLJ Research; 'at Just 80% of Curve, we see ~69% Upside'
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GLJ Research analyst Gordon Johnson raised the price target on US Steel (NYSE: X) to a "Street High" $39.55 (from $23.89) while maintaining a Buy rating, saying the share price is an "embarrassment" at the current levels.
The analyst commented, "U.S. Steel's Current Market Valuation Appears to be "Miles" Away from Reality. After conducting our proprietary analysis of a number of different hot-rolled coil ("HRC") price scenarios (using the current HRC price curve), we see U.S. Steel's current valuation as materially below reality and believe 2021E is setting up as a
"game changer" as it relates to the company's free-cash-flow ("FCF") generation. That is, assuming just 80% of the current forward cost curve, or a $736 HRC price scenario, our analysis suggests the market is currently valuing U.S. Steel's 2023E EBITDA at less than 4.0x vs. the current 2023 EV/EBITDA multiple for peers Nucor (NUE; NC) and Steel Dynamics (STLD; NC) of 11.5x and 8.6x, respectively - Ex. 1. While, admittedly, U.S. Steel has become a "prove it" story, with our view that many are underestimating the tremendous leverage in the company's operating model at the current HRC curve, we believe the company's EBITDA generation and FCF output are firmly positioned to "shock-and-awe" to the upside in 2021E."
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