Shares of Seaspan Corporation (ATCO) jumped on Monday and were up 10% at 2:45 p.m. EST. The catalyst was an analyst upgrade.
Analysts at Jefferies issued a new report on Seaspan today. They gave its stock a buy rating and set a $20 price target, which is worth noting since shares were recently trading at around $6.50 apiece -- and that's including today's 10% pop. Fueling that bullish view is Seaspan's improving business prospects.
Seaspan endured a rough 2016 when a key customer declared bankruptcy, and shipping rates on smaller vessels that it leased to short-term charters sank below break-even levels. However, the company has slowly turned things around this year, with revenue rising for three straight quarters. That said, an even bigger rebound could be just over the horizon. For starters, shipping rates on its short-term vessels have risen sharply off the bottom, which positions the company to capture dayrates as much as $3,500 to $4,000 above their currently chartered rates. In addition to that, the company has some longer-term contracts expiring in 2018 that it could recharter at 50% to 100% above the rates of those existing agreements if current levels hold. These factors, when combined with recent and scheduled additions to its fleet, should push revenue and earnings much higher in 2018.
While the past few years have been rough on Seaspan investors, 2018 looks like it could be a much better year since recent headwinds appear poised to turn into tailwinds. Because of that, Seaspan could have much further to run as those improvements start showing up in its financial results.