AK Steel Shares Could Gain Two-Thirds its Value

AK Steel Holding Corp. (NYSE:AKS)

Morgan Stanley (NYSE:MS) went to bat for AK Steel Corp. (NYSE:AKS) in a big way implying AKS shares could gain more than 66% in the next 12 months.

(NotableCalls.com) Morgan Stanley's Metals & Mining team is out with positive Sector call noting that last week's slew of positive copper data points and outperformance in bellwether stock, FCX, could be harbingers of a shift in sentiment for the space.

They believe the recent ~15% correction provides more favorable risk-reward in steel (top picks AKS, X) and metals (FCX), in particular. Inflation and global growth remain key concerns among investors. Firm's Chinese Economics team expects China CPI to peak in June, which could lead to improved sentiment on growth towards the end of summer.

CO. Current Price Price Target % Change
AKS  $         14.39  $        24.00 66.8%

In particular, they are upgrading AK Steel (NYSE:AKS) to Overweight from Equal-Weight with a $24 price target (prev. NA) saying their Bull Case scenario points to $46 fair value (+266%).

Upgrading to Overweight: AK Steel is turning the corner, and earnings power is not priced in: While shares across the steel space have become cheap as a result of the recent correction, we see significant value upside in AKS shares, in particular (70% to our PT of $24). Our mid-cycle EBITDA estimate is 30% higher than what is discounted in the shares on our view that benefits from sustainable cost cuts, a lesser impact from iron ore costs, and improving margins in the company’s key electrical steel business have gone unnoticed.

source: http://notablecalls.blogspot.com/


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