ZIM Integrated Shipping stock outlook: Jefferies sees 50% upside

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Written on Jan 29, 2024

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Jefferies upgraded ZIM Integrated Shipping to "buy" on Monday.
Analyst Omar Nokta explained why in a research note today.
ZIM Integrated stock has more than doubled since late November.

ZIM Integrated Shipping Services Ltd (NYSE: ZIM) opened sharply up on Monday after a Jefferies analyst issued a super bullish note in its favour.

Zim Integrated Shipping stock could climb to $20

Omar Nokta upgraded shares of the cargo shipping company this morning to “buy” and raised his price target to $20 that suggests a near 50% upside on their previous close.

The analyst is constructive on ZIM Integrated stock primarily because it has now switched from cash burn to significant cash generation.

ZIM’s high spot, high cost and high leverage platform was a major concern in a period of low freight rates, but it now provided substantial upside given the rise in spot rates.

He’s positive on $ZIM even though it’s expected to lose $1.33 a share in its current financial quarter versus $3.44 per share of earnings a year ago.

The global freight cost index just got updated again, and it's now up almost 140% in one month.

This is not the time to underestimate the risk of this exacerbating the inflationary problem.

A second wave is likely in progress. pic.twitter.com/DjxPvEK375
— Otavio (Tavi) Costa (@TaviCosta) January 26, 2024

What Red Sea situation means for Zim Integrated Shipping?

The bullish call arrives shortly after a report said the recent gain in ZIM Integrated Shipping Services Ltd could be rather short lived (find out more).

But Omar Nokta of Jefferies continues to see significant upside in $ZIM on the back of Red Sea diversions. His research note reads:

Red Sea diversions are likely to continue for an extended period, tightening capacity for longer, and ZIM is set to capitalise.

Note that ZIM Integrated stock has already more than doubled over the past two months. The New York listed shares of the Israeli company do not currently pay a dividend.