Castor Maritime (CTRM) stock forecast: What’s its next port?
Cyprus-based global shipping company Castor Maritime (CTRM) has secured $55m in funding to help develop its growth plans.
This comes after a year in which it more than quadrupled its fleet and substantially increased its income. However investors are not embracing the positive news as the stock price has continued to drift down and even hit the $1 mark this week although it has today (26 January) bumped up 7% to $1.17.
Last February the stock was just short of $20 but then declined sharply and after a small recovery in the autumn has now lost 60% of its value since September.
So, what is next for the company and is it worth considering as an investment?
The company, which has been listed on the Nasdaq Stock Exchange since February 2019, is involved in the seaborne transportation of commodities along worldwide shipping routes.
As of 18 January the company said it owns a fleet of 29 dry bulk and tanker vessels with an aggregate capacity of 2.5 million dwt (deadweight tonnage), which is a measure of how much weight a ship can carry.
A number of announcements concerning the rapid expansion of its fleet led to a substantial increase in the company’s share price during February 2021, but these gains have been lost.
Failing to regain momentum
The shipping company’s stock experienced significant volatility, especially after its flotation. After opening at $5.20 on 11 February 2019, the stock reached a record high of $6.40 on 22 April 2019. Yet it quickly sank into a downtrend, landing at $0.119 at the start of November 2020.
In May 2021, Castor Martime announced a 1-for-10 reverse stock split of its shares, which is an important factor for the Castor Maritime stock analysis. A reverse stock split means that several shares were bundled into one with a higher price tag. As a result, the price of the stock increased from $0.425 on 17 May to $3.05 on 24 May. The price has been since trading within the $3.45 to $1.91 range.
Castor Maritime stock news: Latest quarterly results
In early November 2021, the company reported a strong set of third-quarter results, which covered the three months to the end of September.
The report showed net revenue was $43.3m, significantly up on the $2.8m achieved for the same three-month period in 2020, while net income stood at $15.5m – compared to a loss of $600,000.
The company also noted that it had more than quadrupled the number of vessels it owns since the end of December 2020.
“During the third quarter of 2021, and as of the date of this press release, we have taken successful delivery of four vessels consisting of one Kamsarmax and three Panamax dry bulk carriers,” it stated on 8 November 2021.
According to the statement, four dry bulk carriers were added to the fleet during the third quarter, each of which cost around $20m.
Why has income risen so sharply?
According to Castor Maritime’s third-quarter statement, the improvement in revenue was largely driven by an increase in the number of “available days”.
This term refers to the number of days vessels are available and not side-lined by scheduled repairs, dry-dockings or intermediate surveys.
With the acquisition of new vessels since the start of the year, the number of available days rose from 330 in the three months ended 30 September 2020, to 2,189 in the corresponding period this year.
The statement said this was “further underpinned by the healthy dry bulk shipping market” which resulted in the Daily Time Charter Equivalent Rate – a measure of the average daily revenue performance of a vessel – having more than doubled since last year.
This chimes with reports suggesting that this year has seen a global boom in shipping thanks to the huge demand for products as Covid-19 restrictions have eased around the world.
Figures for the nine months
Castor Maritime also announced earnings highlights for the nine months to the end of September 2021, which showed significant improvements over the previous year.
The net revenue figure came in at $72m, compared to $8.1m for the same period in 2020, while the net income of $23.1m was well ahead of the $1m loss last year.
Meanwhile, the earnings per common share were $0.29 for the nine months to the end of September 2021, compared to a loss per share of $0.21 for the same period last year.
Chief executive Petros Panagiotidis said all acquisitions announced since the beginning of 2021 had been completed and he was pleased with the solidity of the balance sheet.
“The cash flow generation in the third quarter was robust and we have been able to fix a number of our vessels at attractive rates with our fleet utilization continuing at high levels,” he said.
Panagiotidis pointed out that demand for dry bulk tonnage remains healthy and the newbuilding orderbook stands at a historically low level.
“We will continue to look for opportunities in the shipping space, taking advantage of our strong capital position,” he added.
In January 2021 it announced that it had taken delivery of two vessels (a tanker and a dry bulk carrier) it had acquired in December. It has also agreed charter deals on two more dry bulk carriers.
Potential risks to the business
In a filing made to the US Securities and Exchange Commission (SEC), the company outlined some of the risks to its operation, some of which relate to the industry as a whole.
These included the fact that charter hire rates for dry bulk and tanker vessels are volatile and have “declined significantly” since their historic highs.
It also pointed out that global economic conditions may negatively impact the industry and highlighted that the company was also exposed to fluctuating prices of oil.
“A shift in consumer demand from oil towards other energy sources or changes to trade patterns for refined oil products may have a material adverse effect on our business,” it added.
Shipping industry projections
A recent report by maritime research firm Drewry revealed that vessel operating cost inflation has slowed this year as some pandemic-related expenses came to an end.
It also suggested that high earnings had encouraged some owners to postpone non-essential maintenance work.
The report warned that wider macroeconomic developments were raising inflationary risks, however, and predicted that decarbonisation initiatives would have a similar effect.
Latifat Igbinosun, head of vessel opex research at Drewry, said: “Owners have taken advantage of the resumption in trade growth and rising vessel earnings to keep ships in service for longer, depressing some areas of spend.”
Castor Maritime (CTRM) stock forecast 2022-2025
As the stock is relatively new, there is not a great deal of analyst coverage on the CTRM stock price forecast. On 26 January the algorithm-driven forecasting service Wallet Investor gave a positive CTRM stock prediction, seeing the stock doubling in price to $2.9 by this time in 2023.
The site suggested that the stock could be a few cents shy of $4.7 in 2024, almost reach $6.5 by 2025, and be closing in on $8.2 a year later.
A five year forecast for the stock, meanwhile, suggested it could be touching $9.96 by 2027. This would represent a 750% potential upside from today’s $1.17 level.
Analyst commentary: “Not such a good bet”
According to Danni Hewson, financial analyst at AJ Bell, would-be investors need to carry out their own research to decide if it’s a stock they want to invest in.
Hewson points out that the company has been on a spending spree to increase its fleet and take advantage of a world where shipping costs have skyrocketed.
She questions its attractiveness to investors, however. “Earnings per share are woeful, seriously diluted over the course of the year as the company looked to raise capital for expansion,” she said.
Hewson noted investors will have their own opinion as to whether the business was overvalued before these latest twists. “This is a company that needs careful consideration before investors make any decisions,” she added.
It’s important to keep in mind that stock markets can fluctuate suddenly and substantially, making it difficult to predict accurately what a stock’s price will be at any time in the future. As such, analysts and algorithm-based forecasters can and do get their predictions wrong.
We recommend that you always do your own research, and consider the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decision. And never invest more than you can afford to lose.
FAQ
Is CTRM a good stock to buy?
Whether CTRM is a suitable investment for you will depend on your opinion of the company and your personal investment objectives. You will also need to research the stock and use this information to decide whether it meets your needs.
Will Castor Maritime stock go up or down?
The Castor Maritime stock’s performance will depend on a number of variables – both company-specific factors and its external environment. You need to carry out your own analysis to form an opinion of a company’s performance and likelihood of achieving analysts’ targets.
Why did Castor Maritime stock rise?
The Castor Maritime share price spiked during the middle of February 2021 after the company made a number of announcements about adding ships to its fleet. The stock has gradually given back those gains, however, and has been drifting below $3 since June 2021.