Over the last few days, Morgan Stanley analysts downgraded Steel Dynamics (STLD) from overweight to equal weight with a price target of $77. They also downgraded their industry view to In-Line, believing steel prices may be peaking.
The firm may be too early with the downgrade, though.
With a good deal of demand, prices could run even higher from here.
In fact, after posting impressive earnings, Steel Dynamics CEO Mike Millett expects for steel demand momentum to continue into the fourth quarter and into 2022. All thanks to demand from the automotive, construction, and industrial sectors. Plus, if we start to see upgrades to infrastructure, demand will increase substantially from here.
Also, in its latest quarter, STLD posted adjusted EPS of $4.96, which was far better than expectations for $4.57. Better, net sales were up nearly 119% year over year to $5.1 billion, That number also beat expectations for $4.98 billion.
Technically, after bouncing from double bottom support around $57.50, the stock is breaking higher. If it can break above its 50-day moving average at $64.20, STLD could again test its August 2021 high of $74.06 a share.
In short, we would ignore the downgrade.
Most of the negativity has been priced in. Steel demand and prices are still pushing higher. Plus, STLD is attractive coming off double bottom.