JPMorgan has unveiled his latest picks for short positions, flagging three stocks — IMAX Corp (NYSE:IMAX), ZIM Integrated Shipping Services Ltd (NYSE:ZIM), and H.B. Fuller Company (NYSE:FUL)— as potential downside plays.
Each faces unique headwinds, with challenging market dynamics and heightened financial strain.
Here's why these stocks are under the microscope for short-sellers.
IMAX: The Big Screen, But Smaller Numbers?
While IMAX has been a leader in high-end cinematic experiences, analyst David Karnovsky is cautious.
Despite the distinct appeal of IMAX theaters, its global Digital Media Remastering (DMR) business is having a rough year. Karnovsky sees more pain ahead, projecting a 13.4% downside due to a weak 2024 box office outlook and an unclear path for 2025 growth.
With blockbusters not consistently delivering and a heavy reliance on DMR performance, IMAX's valuation could be ripe for a correction. Trading at 10x its estimated 2024 EBITDA, the stock appears to lack a clear path to blockbuster gains.
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H.B. Fuller: Sticking With The Wrong Glue?
H.B. Fuller, a stalwart in adhesives and specialty chemicals, is also facing challenges, according to analyst Jeffrey Zekauskas.
The company's margins are under pressure amid rising input costs, and its limited cash generation capacity after acquisitions is compounding issues. Fuller trades at 9.6x its 2025 EBITDA estimate, and with a potential price drop of around 6%, the stock doesn't seem to have much room to maneuver.
Zekauskas sees weak cash flows and pricing pressures as hurdles that may stick with the company well into the future, making it a less-than-attractive hold.
ZIM Integrated Shipping: Treading Water With A Heavy Load
ZIM Integrated Shipping is perhaps the most vulnerable of the trio. With 85% of its volume exposed to spot markets and a significant chunk of its vessels on charters, ZIM is at the mercy of fluctuating container rates.
Analyst Alexia Dogani sees a whopping 58% downside by 2025 as the company grapples with shrinking EBITDA, rising debt, and heavy capital investments. At 6.1x its 2025 EBITDA and 1.1x book value, the math isn't adding up in ZIM's favor, making it a risky bet for long-term investors.
JPMorgan's bearish outlook for IMAX, H.B. Fuller, and ZIM highlights the hurdles these companies face in their respective sectors. From blockbuster inconsistencies to sticky pricing and a sinking shipping market, these companies are navigating challenging waters.
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