ZIM - Here's why the ZIM Integrated stock price is sinking
2024-02-08 05:59:35 ET
ZIM Integrated (NYSE: ZIM) stock price plunged by more than 7% in the pre-market session after a major warning from Maersk, the second-biggest shipping company in the world. The shares crashed to a low of $12, much lower than this month’s high of $15.57.
ZIM Integrated share price has been in a strong uptrend in the past few weeks as the crisis in the Red Sea pushed container prices sharply higher. Data shows that the World Container Index has soared to over $3,800, up from below $1,500 in December. This price increase is expected to lead to more revenues and profits for companies like ZIM and MSC Shipping.
ZIM stock price is plunging after a weak financial report by Maersk. In a statement, the company warned that the industry was going through a rough patch, forcing it to suspend its buyback and slashed its dividends. It estimates that its EBIT will be between a $5 billion loss and breakeven. It also expects that its EBITDA will be between $1 billion and $6 billion.
In a statement, the management warned that the industry was going through a period of saturation, as I wrote in January . The company expects that hundreds of ships will come to the market in the coming months, leading to substantial competition.
ZIM Integrated shares have also retreated as hopes of a ceasefire in the Middle East continued. Earlier this week, Hamas proposed a long ceasefire, a move that Israel has rejected. Still, analysts believe that the situation will cool down soon now that the US is in a campaign mood.
A ceasefire and sustained peace will likely lead to lower shipping prices, which will negatively impact ZIM Integrated and other shipping companies. Therefore, the warning from Maersk means that ZIM will likely not give a special dividend as I predicted last month.
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