Morgan Stanley downgrades U.S. Steel amid limited growth prospects

Today, February 3, 2025, Morgan Stanley announced its decision to downgrade United States Steel, reflecting concerns about the company's growth trajectory. Analyst Carlos De Alba indicated that the stock is currently trading near its target valuation, suggesting limited upside potential. Although the steel prices are expected to increase due to tariffs announced by the White House on imports from Mexico, China, and Canada, De Alba cautioned that demand remains sluggish and could mitigate the positive effects of these tariffs. This downgrade comes in the context of U.S. Steel's stock, which has already declined nearly 20% over the past year. The downward revision from Morgan Stanley is significant as it highlights the challenges facing U.S. Steel amid a shifting market landscape. The firm set a price target of $39 per share, which is nearly 6% higher than the closing price from the previous Friday. This target indicates limited growth potential in the short term. Despite still reflecting some optimism concerning potential deals or partnerships, such as with Nippon or other parties, Morgan Stanley emphasizes a standalone valuation basis for its price target. Market consensus appears somewhat mixed, with analyst data from LSEG indicating that a majority of analysts covering U.S. Steel maintain a buy or strong buy rating. Eight out of twelve analysts have favorable views on the stock, reflecting belief in potential resilience and opportunities for recovery in the steel industry. However, current market conditions, alongside a global market sell-off, have cast uncertainty over U.S. Steel's performance moving forward. U.S. Steel's struggle with nearly two decades of market volatility is compounded by trade tensions and fluctuating demand for steel products. The ongoing global economic uncertainties and recent protectionist measures may lead to a constrained industry outlook. While the recent tariffs could support increased steel prices, analyst skepticism about the potential for meaningful demand growth remains a focal concern. The largely negative perception from Morgan Stanley and others may foreshadow continued challenges for U.S. Steel as it navigates the ongoing complexities of the steel market.