United States Steel Corporation X shares are down more than 8% on Wednesday after the company announced Tuesday a $700 million investment in a 49.9% ownership stake of Big River Steel.

U.S. Steel said Big River Steel has commenced a construction project that will raise Big River’s capacity from 1.65 million tons to 3.3 million tons of flat-rolled steel. As part of the deal, U.S. steel also has an option to acquire the remainder of Big River Steel in the future.

U.S. steel investors didn’t react favorably to the news that U.S. Steel is making a heavy investment in adding capacity during a period of pricing weakness in the steel industry.

Several analysts have weighed in on U.S. Steel stock following the Big River news. Here’s a sampling of what they’ve had to say.

Voices From The Street

BMO Capital Markets analyst David Gagliano said the deal is a sign U.S. Steel is going on the offensive by acquiring a growth asset that could help the company in the long-term.

“However, this transaction adds even more debt, and by our estimates, X is paying a fairly high implied valuation to acquire this asset, with no EBITDA likely to flow through until ~2021/2022 by our estimates,” Gagliano wrote in a note.

Credit Suisse analyst Curt Woodworth said taking on more debt at a weak point in the steel cycle is a gamble for U.S. Steel.

“Given the upcoming ‘Sheet Tsunami,’ the US spot sheet market is likely to see multiple years of recession level margins and rationalization of US blasts furnace footprint as new low-cost EAFs ramp,” Woodworth wrote.

Bank of America analyst Timna Tanners said Big River is now part of U.S. Steel’s long-term vision, but the $700 million price tag increases the chance of equity dilution in the near-term

“In our view, X is adding debt with negligible return into a sector downturn, and perhaps a broader cyclical one,” Tanners wrote.

Ratings And Targets

• BMO has a Market Perform rating and $12 target.
• Credit Suisse has an Underperform rating and $8 target.
• Bank of America has an Underperform rating and $8 target.

The stock traded around $10.92 per share at the time of publication.