CLF Showing Bearish Signals: AI-Powered Options Outlook

The company is a leading North America-based steel producer focused on value-added sheet products, especially for the automotive industry. It is vertically integrated, handling everything from mining iron ore and producing pellets and direct reduced iron (HBI), to processing ferrous scrap through primary steelmaking and downstream finishing including stamping, tooling, and tubing. The company primarily serves the automotive market, along with infrastructure and manufacturing, distributors, converters, and other steel producers. The company differentiates itself through its vertically integrated operations, allowing for more predictable costs and control over the supply chain. It also leverages fixed price contracts to mitigate pricing volatility and focuses on maintaining strong relationships with its unionized workforce. The company offers a comprehensive suite of flat steel products, including advanced high-strength steel, hot-dipped galvanized, and electrical steels like 'GOES' and 'NOES', catering to diverse customer needs.

CLF's technical outlook is mildly bearish. The stock has experienced a significant pullback from mid-October highs, closing most recently at $10.665. The EMA_21 has fallen to 13.08, well above the most recent close. MACD shows a negative divergence, with the MACD line at 0.079 and MACDs at 0.360, and MACDh trending further negative, indicating bearish momentum. The RSI_14 is at 42.62, suggesting the stock is approaching oversold conditions but still has room to decline. The STOCHk is very low at 4.21, though STOCHd is at 13.45, indicating a potential oversold bounce. The price is well above both its 50-day SMA of 12.32 and its 200-day SMA of 9.82, but the recent price action suggests a potential test of the 50-day SMA. The ROC_20 is negative at -6.09. Recent price action shows a clear downtrend, and the technical indicators support further near-term weakness. The ADX of 27.55 indicates a moderate trend strength, and the bearish signals outweigh any bullish reversal patterns, suggesting a continued downward trajectory in the short term.

Cleveland-Cliffs' MD&A presents a mixed outlook. For the three months ended September 30, 2025, revenues increased by 3% due to the Stelco acquisition, but this was offset by declines related to inconsistent buying behavior and idling operations. Steelmaking revenues by market decreased 4% for the nine months ended September 30, 2025. Gross margin increased by $60 million for the quarter, but decreased by $983 million for the nine-month period, driven by lower realized revenue rates and increased depreciation. The company reported a `Net loss` of $(1,193) million for the nine months ended September 30, 2025. `Net cash (used in) provided by operating activities` was $(449) million for the nine months ended September 30, 2025, a significant decrease from $577 million in the prior year. This was attributed to a decrease in net loss after adjustments for non-cash items and a decrease in cash primarily as a result of volatility in average selling price. Management expects domestic steel demand to grow, supported by tariffs and on-shoring, and anticipates capital expenditures of approximately $700 million over the next 12 months. The company is exploring strategic opportunities, including potential asset sales to reduce debt, and is focusing on its automotive steel business and environmental sustainability. The company also issued $850 million aggregate principal amount of 7.625% Senior Notes due 2034 at par.

The earnings call projects a moderately bullish outlook for Cleveland-Cliffs, driven by cost reductions and anticipated volume growth. The company reported improved Q2 results with adjusted EBITDA up $271 million from the prior quarter, fueled by higher shipment volumes and operational efficiencies. Celso Goncalves highlighted a $15 per ton unit cost decrease, exceeding expectations, and anticipates a further $20 per ton reduction in Q3. Management reaffirmed their commitment to a $50 per ton cost reduction for the full year 2025. Lourenco Goncalves emphasized the positive impact of Section 232 tariffs and the potential for increased automotive steel demand, stating, 'Cleveland-Cliffs Inc. is ready for that. We can ramp up quickly and our capabilities, quality, and customer service are well known by all OEMs.' The company is also exploring the sale of non-core assets, potentially generating billions for debt reduction. While a Q2 free cash flow was negative due to working capital investments, management expects improved free cash flow generation in the second half of the year. Overall, the tone suggests confidence in continued improvement and strategic growth.

CLF's financial performance presents a concerning picture. Revenue has fluctuated, starting at $5.199B in Q1 2024 and ending at $4.734B in Q3 2025, indicating a recent decline. Profitability is a significant worry, with negative gross profit ratios consistently reported in recent quarters, exemplified by -0.042 in Q2 2025 and 0 in Q3 2025. Operating cash flow has been highly volatile, plummeting to -$143M in the latest quarter (Q3 2025) after a positive $519M in Q2 2024. Furthermore, the company's solvency is weakening, as total debt has more than doubled from $3.664B in Q1 2024 to $8.039B in Q3 2025. The combination of declining revenue, negative profitability, erratic cash flow, and increasing debt raises substantial doubts about CLF's short-term financial stability and its ability to sustain operations at the current level. These factors collectively point towards a bearish outlook.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting effective cost management. Return on Equity (ROE) has improved, showcasing efficient capital allocation. While the Price-to-Earnings (P/E) ratio is elevated, it is potentially justified by the company's growth prospects. The Debt-to-Equity ratio has decreased, reflecting a healthier balance sheet and reduced financial risk. The current ratio is at a healthy level, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable combination of growth, profitability, and balance sheet strength, supporting a positive outlook for the next 12 months, although the high P/E ratio warrants close monitoring.