A recent jump in fixed annual steel price contracts should boost free cash flow for mining company Cleveland Cliffs , making now a good time for investors to snap up shares, according to Morgan Stanley. Morgan Stanley upgraded the company to overweight from equal-weight and boosted its price target to $26 from $13.60 in a Wednesday note. That new target implies upside of 35% from Wednesday’s close. “We believe the recently announced increase in fixed annual steel price contracts (see here) should allow CLF to cope with lower forecast spot steel prices and generate robust FCF yields in the coming years as the company has no major planned capital expenditures,” Carlos De Alba wrote in a note. Shares ticked up more than 2% in premarket trading following the upgrade. The company announced in December an increase to its annual price contracts for auto customers — their largest end market. “The fixed-priced contracts are expected to account for 40-45% of the company’s total steel volumes in 2023 … with the remaining 55-60% exposed to index pricing,” De Alba said. In addition, Morgan Stanley thinks that those increases in fixed price contracts are not fully baked into sell-side consensus estimates. The new contracts should lead to positive 2023 earnings revisions and result in further tailwinds for the stock, De Alba wrote. “We believe a near-term catalyst for the stock will be the release of 4Q22 earnings, as historically the company provides guidance for their expected average selling price for the year,” said De Alba. “This should provide further clarity and greater confidence to the market on the impact of the increase in the annual fixed price contracts.” — CNBC’s Michael Bloom contributed reporting.