CLF's 2025 Losses Confirm DeepValue's Cautious Stance on Fragile Turnaround

What happened

Cleveland-Cliffs endured a tough 2025, with a Forbes article revealing a full-year GAAP net loss of approximately $1.4 billion on $18.6 billion in revenue, including a $235 million loss in Q4 on flat sales. This aligns with the DeepValue report's warning of persistent financial strain, as the company's negative operating cash flow and high leverage, with net debt/EBITDA at 20.42, continue to undermine equity value. Management's cost-cutting and multi-year auto contracts, while strategic, have yet to translate into sustainable profitability, leaving the integrated steel model exposed to volatile pricing and demand cycles. The Q4 results, showing no revenue growth and significant losses, underscore that CLF's recovery remains fragile and heavily reliant on external supports like tariffs and auto sector stability. Investors must now critically assess whether projected EBITDA improvements above $1 billion are achievable or if further deterioration toward the bear case of $8 per share is likely.

Implication

The 2025 financial results validate the DeepValue report's assessment that CLF operates with minimal margin of safety due to negative cash flow and elevated debt, necessitating caution for value-oriented investors. Until the company demonstrates consistent positive operating cash flow and net debt reduction, the stock's current price of around $14.11 already discounts a successful turnaround, offering limited upside without fundamental improvement. In the base scenario, achieving an implied value of $15 requires effective cost cuts and stable auto demand, but the latest losses cast doubt on near-term execution, while the bear case of $8 looms if steel prices weaken or tariffs are rolled back. Key monitoring points include upcoming quarterly reports for signs of EBITDA recovery and asset sale proceeds used for deleveraging, as further dilution or liquidity stress could erode equity value. Therefore, patience is warranted, with attractive entry points better defined by tangible progress toward the $1 billion EBITDA target and self-funded balance-sheet repair.

Thesis delta

The 2025 financial data does not shift the core investment thesis but hardens the existing cautious stance by confirming that CLF's turnaround efforts have not yet stabilized profitability. The DeepValue report's 'WAIT' rating remains justified, as losses highlight ongoing execution risks without new catalysts for near-term improvement. Investors should continue to prioritize evidence of sustained positive cash flow and debt reduction before reevaluating the stock for potential upside.