ZIM Integrated Shipping Services (NYSE:ZIM) shares have surged by nearly 107% year-to-date amid the Red Sea crisis. The Street, however, has a bearish stance on ZIM. Despite this, the container line shipping company’s fortunes could continue to shine this year.
The Red Sea Crisis
The current crisis in the Red Sea has resulted in capacity shortages, delays, and a strain on the global supply chain. With cargo ships sailing around the Cape of Good Hope, longer voyages have reduced available capacity in the shipping industry by around 15%-20%. While this means higher costs for shipping companies, they are also benefiting from elevated container freight rates.
Potential Boost to ZIM’s Fortunes
ZIM, in particular, stands to benefit more from this trend as the company signs nearly two-thirds of its contracts on spot rates. Moreover, tensions in the Red Sea may not subside any time soon. So far, the Houthis have sunk two ships and damaged another via a drone strike this week. This means further caution and elevated freight rates. Additionally, it could be a while before ships return to their original routes even if the Houthi attacks cease.
Consequently, ZIM could continue to benefit in H2 2024. Last month, the company posted robust Q1 numbers, thanks to increases in its carried volume and average freight rates. Additionally, ZIM hiked its financial outlook for the full year. It now anticipates that adjusted EBITDA will be in the range of $1.15 billion to $1.55 billion for the year.
What Is the Price Forecast for ZIM Stock?
Still, the stock has scored Sell ratings from analysts in recent weeks as signs of easing freight rates emerged. However, the current scenario could potentially prompt a change in analysts’ views on ZIM. For now, though, the Street has a Moderate Sell rating on the stock, alongside an average ZIM price target of $13.05.
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