ZIM Integrated stock tragic collapse from $90 to $20: buy the dip?

By:
on Apr 19, 2023
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  • ZIM Integrated share price has crashed from $90 to $20.
  • Shipping costs have dropped sharply in the past few months.
  • Analysts have downgraded their revenue and profitability metrics.

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ZIM Integrated Shipping (NYSE: ZIM) stock price has been in a downward trend for months as concerns of a global slowdown continue. The shares have also been hit by elevated fears of a dividend cut as the company preserves cash. Further, shipping costs have dropped, which has hit many shipping companies, including Star Bulk Carriers and Matson.

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Is this fear warranted?

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ZIM Integrated Shipping has been under pressure as investors continue worrying about the company’s future profitability. The main challenge is that with the global economy expected to slow, the cost of shipping has dropped.

As a result, many analysts have downgraded the company’s financial estimates of the year. As shown below, analysts have reduced the overall estimate of the company’s revenue for this year. They expect that its revenue for this year will be $6.32 billion followed by $6.26 billion in 2024. The same trend is happening in its profitability, where they expect the EPS to drop to -$2.34 this year.

ZIM earnings estimates

The fact that ZIM Integrated’s revenue and profitability for this year will be down cannot be debated. Besides, the cost of shipping has been in a downward trend for months. The main question is how unprofitable ZIM will be this year. 

In its most recent results, the company said that it believes that shipping costs are about to bottom and that market conditions will improve this year. It is still unclear whether shipping rates will bounce back this year. A report this week showed that container shipping costs have jumped sharply although analysts cautioned that it could be an artificial inflation of prices.

Therefore, the question is whether ZIM Integrated has the financial resources to manage this slowdown. Unlike other shipping companies, ZIM has a strong balance sheet with over $4.6 billion in cash. It also has zero net leverage and it expects to have an EBITDA of $7.5 billion this year.

Most importantly, ZIM has changed its business model to incorporate more chartering, meaning that its business is now asset-light. As such, I believe that the company, which is highly undervalued, is well-positioned for the new normal, as I wrote here.

ZIM Integrated stock price forecast

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ZIM Integrated

ZIM chart by TradingView

On the daily chart, we see that the ZIM share price has cratered in the past few months. Precisely, it has crashed from last year’s high of $91.50 to the current $20. This means that investors have lost billions of dollars even as the dividend yield has jumped. 

A closer look shows that the steep downward crash has faded and the stock is now moving sideways. This is a sign that bottoming is near. While it is too early to tell, I suspect that the shares will bounce back in the coming months. This view will be confirmed if the stock moves above the key resistance point at $25.70, the highest point this year. 

This breakout will likely happen in May when the company will publish its financial results. A break below the year-to-date low of $15.36 will mean that bears have prevailed.

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