AK Steel shares slump as analyst downgrades stock

Shares of AK Steel Holding Corp. plunged Friday as an analyst downgraded the stock to "Neutral" from "Buy," saying the steel maker's share price already reflected gains from a possible demand revival.

AK Steel, like other steel companies, has been hit hard by the recession, which has erased orders from key customers in the automotive, construction and industrial equipment industries. The West Chester, Ohio-based company derives a significant amount of its revenue from the beleaguered Detroit automakers, including Chrysler LLC and General Motors Corp.

Some analysts have predicted an eventual upturn in steel demand as the inventories of distributors and manufacturers run low and government economic stimulus spending kicks in.

"Though the company should benefit from infrastructure stimulus as well as a recovery in flat steel fundamentals, we believe that this has already been factored in the stock price and see limited upside from the current levels," Goldman Sachs analyst Sal Tharani wrote in a note to investors. He wrote that "we see limited upside from our current target price of $20."

"Since being upgraded to Buy from Neutral on April 12, 2009, AKS's shares outperformed all our coverage and were up 118 percent versus the S&P 500 increase of 10 percent," Tharani wrote. "Over the last 12 months, AKS shares declined 72 percent compared to a fall of 31 percent for the S&P 500 Index."

Shares of AK Steel sank $1.69, or 8 percent, to $19.45 in afternoon trading.