Cleveland-Cliffs Inc. (NYSE:CLF) shares soared 22% after the company revealed it had signed a memorandum of understanding (MOU) with a foreign steel producer and was evaluating potential rare-earth mineral opportunities at its iron ore mines in Michigan and Minnesota. But analysts at Wells Fargo were quick to label the market’s reaction as excessive, downgrading the stock to Underweight from Equal Weight.
“Enthusiasm over unknowns seems excessive,” Wells Fargo analysts wrote in a note.
The surge followed remarks from CEO Lourenco Goncalves, who confirmed the agreement with a “major global steel producer” and outlined the company’s interest in developing rare-earth resources. In addition, Cleveland-Cliffs announced plans for roughly $425 million in asset sales as part of its broader capital strategy.
Wells Fargo, however, argued that the rally was not justified given the lack of details around the agreement and the uncertainty surrounding rare-earth development prospects.
“We don’t know of other deposits in the region, and would be skeptical of an attractive return absent further information,” the analysts added.
Despite Cleveland-Cliffs reporting third-quarter adjusted EBITDA of $143 million — beating consensus estimates by 12% — revenue came in around 3% below expectations. Management also reduced its 2025 capital spending forecast by $75 million to $525 million.
Wells Fargo lowered its own fourth-quarter EBITDA estimate by 11% to $147 million, saying market expectations of $211 million appear too optimistic. The firm expects stronger performance in 2026 as higher-margin automotive contracts take effect and steel prices recover.
The analysts concluded that Cleveland-Cliffs’ valuation “has run ahead of fundamentals,” reiterating a price target of $11, based on 8x projected 2026 EBITDA — above the historical average multiple of 6–7x over the past three years.