Shipping investor darling Zim has been downgraded by a respected analyst at a time when the container ship heavyweight is cashing in on multiple disruptions.
New York-listed Zim has caught tailwinds from a historic US ports strike, adding to its position as one of the main beneficiaries of the Red Sea crisis.
With both macro events priced into the Zim stock, Jefferies analyst Omar Nokta has bumped the company from “buy” to “hold”.
At the same time, it has been removed from Jefferies’ Franchise Picks list.
Nokta said Zim has enjoyed a strong run and is trading up 40% over the past month.
While dockworkers remain on the picket line following the biggest walkout in the US since the late 1970s and disruptions could grow, this risk is already priced into Zim, he argues.
Nokta explained that the strikes cover ports handling half of all US container imports, 60% of exports and one-tenth of global boxship trade.
However, the threat has been growing for months, and shippers and retailers have already made contingency moves, he wrote in a note today.
At the same time, the Red Sea crisis, which has sent container ship profits soaring, is set to stretch well into 2025, Nokta said.
“Zim is in position to end 2024 with $2.5bn of cash, lower than $2.7bn coming into the year, though it would have also paid $356m of dividends along the way,” the analyst said.
“The outlook for the industry remains binary, ie, whether the Red Sea is ‘open’ or ‘closed’. Given the strong performance recently, we lower our rating from Buy to Hold and maintain our $25 target.”
Zim stock closed at $24.32 per share on Tuesday in New York, off a 52-week high of $26.20 as the dockers downed tools earlier this week.
