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Why Costamare Stock Popped 13.5% This Morning

By Rich Smith – Updated Jul 22, 2020 at 11:13AM

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Stifel upgrades the stock ahead of the recovery.

What happened

Shares of containership operator Costamare (NYSE: CMRE) jumped 13.5% in early trading Wednesday and remains up a healthy 7.3% as of 10:30 a.m. EDT.

You can thank Stifel Nicolaus for that.

Docked containership loaded with shipping containers

Image source: Getty Images.

So what

Yesterday evening, after close of trading on the NYSE, investment bank Stifel Nicolaus announced it is upgrading Costamare stock from hold to buy, and assigning the $5 stock an $8 price target, according to TheFly.com.

The global economy is still pretty much a mess, and the overall market for containership leasing is "still far from fully recovered," says Stifel. Nonetheless, shipping volumes appear to be recovering, while the percentage of containerships being chartered (utilization) and the rates operators are getting for them have hit bottom and begun to bounce.

With Costamare shares selling for a cheap 4.3 times trailing earnings, Stifel believes that now is the time to jump on this recovery trend and ride Costamare stock higher.

Now what

And if you ask me, that is the right call. Coronavirus or no coronavirus, Costamare's profits and free cash flow both continued to climb through the first quarter of 2020.  

Barring a disaster in earnings, the stock's valuation looks extremely attractive at 4.3 times reported earnings and just three times actual free cash flow. Although the stock is not quite as cheap as it looks (you also need to factor in Costamare's $1.4 billion in net debt, which roughly triples each valuation multiple on an enterprise value basis), it's still cheap enough to be worth a look.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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