Citigroup downgrades its rating on ZIM Integrated Shipping Services Ltd (ZIM) from Neutral to Sell and sets a target price of $13. The basis for this downgrade is the stock's recent rebound and increasing exposure to spot freight rates that will face pressure.
According to the Wisdom Financial app, on Thursday, ZIM Integrated Shipping Services Ltd (ZIM.US) fell nearly 19% to $19.34. Prior to this, Citigroup lowered its rating on ZIM to Sell from Neutral and set a target price of $13 due to the stock's recent rebound and increasing exposure to spot freight rates that will face pressure.
Citigroup analyst Sathish Sivakumar stated that ZIM has only signed about 35% of cross-Pacific trade contracts, which is much lower than the industry standard of about 65% and lower than last year's 50%. He also pointed out that 40% of ZIM's freight comes from cross-Pacific trade routes.
Analysts believe that the recent trend of spot freight rates (up more than 70% since the end of the first quarter) is unlikely to continue into the second half of this year. They believe that demand in the fourth quarter will face a downward risk of about 7% year-on-year, which means that the current supply-demand imbalance will be relieved, putting pressure on freight rates.