What happened

Shares of the Israel-based Zim Integrated Shipping Services (ZIM) are rocketing higher today. Specifically, the international cargo-shipping company's stock was up by a healthy 11.6% on extremely heavy volume as of 2:23 p.m. ET Tuesday afternoon. 

What's sparking this breakout? Zim, for its part, has maintained radio silence since its last material update over two weeks ago. Instead, the company's stock appears to be benefiting from a wave of bargain buying today. 

So what

Over the last 12 months, Zim's stock has become a favorite target among short sellers. As a result, the cargo-shipping company's stock has fallen by a whopping 65.7% over this period. Zim's stock stood out as a prime short target due to falling freight rates, a steep drop in demand, and its former premium valuation stemming from an influx of investors into the stock during the COVID-19 pandemic. 

After another major dip in its stock price last week, this bearish outlook may be wildly overdone. Zim's stock, after all, is currently being valued at an eye-catching 0.45 times trailing-12-month earnings. While it is true that Zim is likely to experience a hefty drop-off from both a top- and bottom-line standpoint this year, the stock is arguably being valued as if the company is in deep financial trouble. Nothing could be further from the truth. 

In its latest earnings report, Zim's management highlighted the fact that the company ought to generate an adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of between $1.8 billion and $2.2 billion in 2023. That amount definitely qualifies as a fairly healthy and robust business even if it does represent a sharp drop-off from the company's pandemic highs over the course of 2021 to 2022. Turning to the specifics, Zim posted adjusted EBITDA of $7.54 billion in 2022 and $6.60 billion in 2021.  

Now what

Can Zim's stock head even higher? That's a tough call. Marketwide forces stemming from a possible U.S. recession might sideline bargain buyers in the coming months. No one knows for sure. So if you are buying this beaten-down shipping stock right now, it is arguably best to do so with the understanding that more volatility may be ahead and that Zim's core business could take a while to fully recover from an economic slowdown.