Morgan Stanley downgrades U.S. Steel, sees limited growth opportunities ahead(Feb 3 2025)

created At: 2/6/2025

Neutral

This analysis was written from a neutral perspective. We advise you to always make careful and well-informed investment decisions.

US Steel Corp

Fact

Morgan Stanley downgraded US Steel to equal weight from overweight Price target set at $39 (6% upside from Friday's close) 8 out of 12 analysts rate stock as buy/strong buy Stock down 20% over past year White House announced new tariffs on Mexico, China, and Canada Bull case scenario of $55/share based on potential Nippon deal

Opinion

US Steel's current situation presents significant concerns. Despite widespread analyst optimism, the company faces multiple headwinds that could limit growth potential. The reliance on tariffs for price support while demand remains weak suggests a fragile business environment, and the stock's 20% decline over the past year indicates the market's skepticism about the company's growth prospects. The potential Nippon deal appears to be priced as a speculative premium rather than a reliable catalyst.

Core Sell Point

The combination of limited organic growth potential, weak demand, and dependence on political factors like tariffs suggests US Steel's stock faces significant downside risks despite analyst optimism and potential M&A speculation.

United States Steel is running out of runway for growth, according to Morgan Stanley. The firm downgraded the steel stock to equal weight from overweight on Monday, alongside a $39 per share price target. Morgan Stanley’s forecast implies nearly 6% upside from Friday’s close. Analyst Carlos De Alba said U.S. Steel stock is currently trading right around its target valuation for the company, which leaves little room to run moving forward. “However, we no longer see meaningful upside to our standalone price target. While a deal with Nippon — or another party — may still happen, which is reflected in our $55/[share] bull case, we continue to set our price target on a standalone basis,” the analyst said. More broadly, De Alba said he expects steel prices to rise due to President Donald Trump’s tariffs, but added that those price rises could be kept in check by sluggish demand. The White House over the weekend announced levies on imports from Mexico, China and Canada. The move sparked a global market sell-off. Analysts are mostly positive on the stock. LSEG data shows eight of 12 analysts who cover the stock rate it as a buy or strong buy. U.S. Steel has slipped nearly 20% over the past year. X 1Y mountain United States Steel stock.

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