What happened
Following an analyst's bearish opinion that was reported last Friday, shares of ZIM Integrated Shipping Services (ZIM -0.43%) have consistently fallen throughout the week.
As of the end of trading on Thursday, the international cargo shipping stock has tumbled 12.8% since the end of last Friday's trading session, according to data provided by S&P Global Market Intelligence.
So what
Predicated on the belief that ZIM's management has an overly optimistic assumption of spot rate prices, Samuel Bland, an analyst at JPMorgan, downgraded the shipping stock to neutral from overweight late last Friday. However, investors may have placed greater weight on the revised price target. Bland slashed the price target to $20.80 from $27.
Consequently, the upside to ZIM's stock seemed considerably lower. On the day Bland announced his revised price target, shares of ZIM closed at $19.25, meaning the $20.80 price target implied upside of 8%.
In its fourth-quarter 2023 earnings report, ZIM forecast 2023 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1.8 billion to $2.2 billion. The company reported adjusted EBITDA of $7.5 billion for 2022.
Now what
While Bland may be right in speculating that ZIM has overestimated its spot rate prices for 2023, it's important to remember that the price target is not set in stone. Often, analysts have shorter time horizons than the long-term outlooks we favor.
In addition, ZIM is on financially sound footing. The company is not overly reliant on leverage, ending 2022 with a net cash position of $279 million, which is an advantageous position should the company see lower rates than it seems to anticipate.
