Market News

ZIM, DAC: What’s Behind the Painful Retreat of Shipping Stocks?

Story Highlights

A drop in demand is taking a toll on the container market and companies operating in this space.

Shares of the ocean transport operators ZIM Integrated Shipping Services (NYSE:ZIM) and Danaos Corporation (NYSE:DAC) have lost about 60% and 32% of their value in six months, respectively (refer to the graph below). The normalization of demand following the last year’s peak is taking a toll on these marine shipping companies. 

During the Q3 conference call, DAC’s CEO John Coustas said, “This quarter marked the retreat of the container market from unsustainable stratospheric highs to more normalized levels, albeit still well above 2019 levels.” 

Economic uncertainty, easing supply-chain challenges, and high inflation led to a moderation in containerized freight, thus negatively impacting their stock price. (Learn more about DAC’s financials here.)     

Adding to their woes, the rising COVID-19 infections in China, the regime’s zero-COVID policy, and protests against strict lockdowns imply that the demand for marine shipping services could worsen and lead to a further correction in these stocks. 

Against this backdrop, let’s look at what’s on the horizon for these stocks. 

Is ZIM Stock a Buy, Sell, or Hold?

ZIM stock has a Hold recommendation on TipRanks based on five Holds and one Sell recommendation. Moreover, the analysts’ average price target of $25.13 implies 18.5% upside potential. 

Our data suggest that hedge funds decreased their holdings in ZIM stock and sold 288.6K shares last quarter. Moreover, it carries a Neutral Smart Score of four on 10.        

Is Danaos Stock a Good Buy?

Like ZIM, Danaos stock also sports a Neutral Smart Score (five out of 10) on TipRanks despite hedge funds buying its stock last quarter. Meanwhile, Citigroup analyst Christian Wetherbee recommends a Hold rating on Danaos stock. Wetherbee’s price target of $65 implies 18.2% upside potential. 

Disclosure

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