Arctic Securities expanded its container coverage and initiated coverage of AP Moller-Maersk with a “buy” recommendation.
The current share price offers attractive risk/reward, according to analysts Kristoffer Barth Skeie and Lars Moen Eide.
The Norwegian investment bank set a share target price of DKK 11,948 ($1,744).
“At current valuation, there is ‘only’ upside in our view,” the analysts said in a note.
Maersk shares closed at DKK 10,425 in Copenhagen on Monday.
“The liner giant is gradually evolving into an end-to-end logistics provider, but the worries about mean freight rate reversion are weighing on the stock, which has yielded a total return of negative 9% [so far this year],” Arctic said.
According to Arctic, the container fleet grew by 8.1% last year and is set for 10.9% growth this year following massive ordering in 2021 and 2022.
The rerouting around the Cape of Good Hope due to the disruptions in the Red Sea boosted teu-miles by 12%, which helped push the market upward.
“We believe the market balance will soften, even without a reversal of Red Sea disruption,” the analysts said.
They estimate rates decreasing from $2,501 per 40-foot equivalent unit (feu) this year, to $2,251 per feu in 2025 and $1,972 per feu in 2026, basically back to 2019 levels.
“Everybody knows that the market is going to be rough, but Maersk is priced that way as well,” the analysts explained.
Maersk has a net cash position of $3.6bn, which makes it prepared “to weather a potential storm, and current valuation in the equity market is too bearish”.
“We believe that the reinstatement of the buyback programme and increased dividends will be beneficial for the capital structure and help re-rate the stock,” the analysts concluded.
