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ZIM Integrated Shipping (NYSE:ZIM) +2.6% in Friday's trading, recovering a slice of the stock's 7% drop in the past two days to an intraday record low $6.77 after swinging sharply to a Q3 loss and cutting adjusted EBITDA guidance for the full year.
ZIM (ZIM) posted a Q3 loss of $18.90/share compared to a $9.66/share profit in the year-earlier quarter and revenues plummeted 61% Y/Y to $1.27B, while cutting guidance for full-year adjusted EBITDA to $900M-$1.1B from its previous view of $1.2B-$1.6B and below $1.17B analyst consensus estimate.
J.P. Morgan downgraded ZIM (ZIM) to Neutral from Overweight with a $6.20 price target, cut from $14, saying the Q3 results were "materially worse" than expected.
JPM's Samuel Bland said he expects ZIM (ZIM) to lag peers "from a profitability perspective over the next 2-3 years, due to high costs related to ship charters."
The analyst said he standardized freight rate assumptions for ZIM (ZIM) with recent reductions made at Maersk and Hapag-Lloyd, resulting in larger losses and prompting the downgrade.
Bland said he has no reason to expect ZIM (ZIM) to have lower profitability than its competitors, given the 46 newbuilds are at more competitive prices, but "we think the level of cash burn over the next 2-3 years may be sufficient to remove any upside for equity investors, and so we have a Neutral view."