Shares of the cargo shipping company ZIM Integrated Shipping Services (NYSE:ZIM) recovered a bit in 2023. It gained about 22% year-to-date as freight rates showed signs of stability. Freight rates are a key driver of shipping companies’ profitability and stock price. While freight rates have stabilized a bit after declining in 2022, Jefferies analyst Omar Nokta believes it is not enough to support the profitability of most shipping companies.
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Nokta has a Hold recommendation on ZIM stock. Meanwhile, his price target of $20 shows a downside potential of 4.6%.
Nokta is cautious about the container sector and sees challenges from “slower demand growth and unwinding congestion.” Further, he expects the management to take a conservative approach toward dividend payments due to market uncertainty.
He said the investors eagerly await a significant dividend announcement by the company when it is expected to report Q4 earnings on March 20. The analyst highlighted that ZIM has a strong cash position, but he expects the management to preserve capital.
While Nokta remains sidelined on ZIM stock, Barclays analyst Alexia Dogani downgraded it to Sell, citing a “challenging downcycle” in the sector. Further, he lowered his price target on ZIM stock to $15 from $26.50.
Dogani believes that the global container shipping industry will likely face headwinds from oversupply and sees balance sheet risk ahead.
Is ZIM Stock a Buy or Sell?
ZIM faces challenges ahead, which is reflected in the Moderate Sell consensus rating on TipRanks. ZIM stock has received two Hold and two Sell recommendations. Moreover, their average price target of $17.03 implies 18.79% downside potential.
Bottom Line
The normalization of demand following the COVID-led boom has weighed on the stock price of ZIM. While analysts are cautious about the company’s future prospects, hedge funds have also lowered their exposure. Our data shows that hedge funds bought 288.6K shares of ZIM last quarter. Meanwhile, it has an Underperform Smart Score of one.
