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ZIM Integrated Shipping Services (ZIM) stock forecast: will demand stay?

By  Yoke Wong

Edited by Vanessa Kintu

18:29, 24 January 2022

March 30, 2021, Brazil. In this photo illustration a Zim Integrated Shipping Services logo seen displayed on a smartphone
ZIM Integrated Shipping Services (ZIM) stock forecast: will demand stay? – Photo: Shutterstock

Share prices for Haifa, Israel-headquartered ZIM Integrated Shipping Services (ZIM) hit an all-time high over the past week amid strong quarterly earnings and robust demand outlook.

ZIM’s share price, traded on New York Stock Exchange (NYSE), peaked at $63.70 on 14 January 2022, nearly a year after its initial price offering (IPO) last year.

Although the price has since fallen, and was at $58.12 at the time of writing on 24 January 2022, ZIM stock value is still up nearly fourfold from its IPO price of $15 per ordinary share last year.

Buoyed by a strong shipping market and quarterly earnings, ZIM stock prices have been rising mostly since its shares were listed on NYSE on 28 January 2021.

ZIM stock chart

Are you interested in learning more about the outlook for the ZIM stock market? Read this ZIM stock analysis to find out about the company’s business model, latest ZIM stock news and analysts’ ZIM stock price prediction.

ZIM business overview

ZIM was launched in Israel in 1945, initially to transport hundreds of thousands of immigrants to the newly created state of Israel, and eventually moved from passengers to cargo, ultimately establishing itself as a leading asset-light container-liner shipping company as of the 1970s. It is one of the world’s oldest shipping liners with 75 years of experience.

As of December 2021, according to Statista, the company operates 107 vessels with a total capacity of around 400,000 TEU (twenty-foot equivalent unit); nearly all these shipping capacities are chartered-in, with short-term charter arrangements. This enables ZIM “to adjust its capacity to meet changing market conditions, optimise vessel deployment, ensure high utilisation of vessels, and exploit specific trade advantages”. 

The company operates shipping routes across five geographic trade zones, including the Transpacific (39%), Cross Atlantic (22%), Cross Suez (12%), Intra-Asia (21%) and Latin America (5%) routes.

“Within these trade zones, ZIM strives to increase and sustain profitability by selectively competing in niche trade lanes where we believe that the market is underserved and that we have a competitive advantage versus our peers,” said ZIM.

In response to the growing e-commerce demand, ZIM launched new premium high-speed services in 2020. The high-speed lines are: ZIM eCommerce Xpress (ZEX), which moves freight from China to Los Angeles, and ZIM China Australia Express (CAX), which moves freight from China to Australia.

Zim has also said these services are designed to transport “time-sensitive cargo, which provides a compelling alternative to air freight”, and thus enables it to “execute in new niche lanes where we can offer a unique product and become the carrier of choice for our customers”. 

Using digitisation, data analysis and AI to improve profitability

ZIM has been investing in information technology systems, digitisation, data analysis and implementation of findings, and artificial intelligence (AI) to enhance efficiency, cost savings and profitability across the group. 

Among the tech tools and developments it is implementing, ZIM has developed front and back-end platforms and applications that prioritise vessels and cargo mix with higher yields, thus facilitating ease of doing business. For example, its yield- management platform, Hive, enables instant cargo selection and booking acceptance. 

Investment in ‘green’ LNG dual-fuel vessels

During its December 2021 investor presentation, ZIM said it aspires to be the lowest-carbon-intensity operator among its competitors, with over 40% of its operated fleet fuelled by liquefied natural gas (LNG) by 2024.

Unlike traditional shipping vessels that are powered by marine fuels obtained from the distillation of petroleum, LNG dual-fuel vessels are “the cleanest technology available”, said ZIM. Compared with fossil fuels, the combustion emitted by LNG contains 25% less carbon dioxide, 99% less sulphur and 85% less nitrogen oxides.

As part of its carbon-reduction plans, ZIM has concluded two long-term charter agreements for 10 vessels with 15,000 TEU and 15 vessels with 7,000 TEU.

The 15,000 TEU vessels will serve on the Asia–US East Coast trade route and are expected to be delivered between February 2023 and January 2024. ZIM plans to use the 7,000 TEU vessels to serve various global and regional trade routes, and these vessels are expected to be delivered between Q4 2023 and 2024.

On 18 January 2022, ZIM announced a new eight-year charter agreement for three 7,000 TEU LNG dual-fuel container vessels. 

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Rising income and margin in 2021

Rising freight rates and carried volume boosted ZIM’s revenue and its third-quarter 2021 earnings rose substantially, with the company stating it had achieved the “highest-ever quarterly net income”. 

ZIM’s total revenue in the third quarter of 2021 more than tripled year-on-year to $3.14bn, compared to $1.01bn in the same period in 2020.

Net income for the third quarter of 2021 was $1.46bn or $12.16 per diluted share, compared to $144m or $1.36 per diluted share in the third quarter of 2020 – a year-over-year increase of 913% and 794%, respectively. 

The average freight rate ($/TEU) nearly tripled to $3,226 in Q3 2021, up from $1,176 a year ago. The carried volume in Q3 increased by 16% year-on-year to 884,000 TEU.

As a result of the surge in freight rates and higher carried volume, ZIM’s adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) margin increased by more than 2.5-fold to 66%.

In September 2021, ZIM distributed a $2.00 per share special dividend and a $2.50 per share interim dividend for Q3 2021 in December. ZIM said in the Q3 financial result that it is now “transitioning to paying quarterly dividends to provide shareholders with an immediate and more frequent return”.

ZIM said it will return “significant capital to shareholders in 2022” and is expected to distribute 30%–50% of 2021 net income.

“Reflecting ZIM’s strong outlook and extremely positive container liner market fundamentals, we have once again raised our full-year 2021 guidance,” said ZIM president and CEO and president Eli Glickman.

ZIM’s 2021 full-year adjusted EBITDA is expected to be between $6.2bn and $6.4bn, and adjusted EBIT is projected at between $5.4bn and $5.6bn.

 Summary of key financial and operation results

Source: Zim Intergrated Shipping Services

ZIM Integrated Shipping Services stock forecast

ZIM Integrated Shipping Services’ robust outlook and earnings forecast have led to some bullish price projections in the market. According to algorithm-based financial market technical analysis and forecasts provider Wallet Investor, the average ZIM stock forecast 2022 is expected to rise to $96.702 over the next 12 months and to $240.813 by the end of 2026. 

Meanwhile, the forecast from a second provider – AI Pickup – is more bearish towards the end of this year, with an average price of $79.71 for 2022 and $50.53 for the end of the decade. The service expects the stock to peak at an average of $92.57 in 2023.

ZIM stock price target

According to Market Beat, half of the six Wall Street analysts surveyed recommended “buy” for ZIM stock, while two recommended ‘hold’ for the period up to 21 January 2022. Only one indicates ‘sell’.

The average 12-month ZIM stock price target is $59.60 in a positive scenario, with 2.83% downside possibility. Of analysts surveyed, those giving it a positive rating think the ZIM share price could reach $80, while those with a negative outlook consider it could fall to between $30–$38.

When considering whether to invest in the company’s stock, you should always do your own research, considering the outlook and relevant market conditions. 

A number of factors dictate whether stock prices rise or fall, including the company’s fundamentals and broader macroeconomic factors. There are no guarantees. Markets are volatile. You should conduct your own analysis, taking in such things as the environment in which it trades and your risk tolerance. Never invest any money you cannot afford to lose.

FAQs

Is ZIM Integrated Shipping Services a good stock to buy?

Shipping demand and earnings forecast for ZIM Integrated Shipping Services is positive in the period from 2021–2022, which could support the company’s share prices. However, whether it is a good buy or not will depend on your investing goals and portfolio composition. You should do your own research and never invest what you cannot afford to lose.

Why has the ZIM stock price been going up?

As a shipping company, ZIM’s stock prices are driven by the rising freight rates and shipping demand.

Will ZIM stock go up or down?

Two forecast data providers expect ZIM stock prices to rise in the next five years. Wallet Investors expect ZIM stock prices to rise to as high as $240.81 by 2026, while AIPickup.com is less bullish, forecasting the share price to peak at $92.57 in 2023.

However, analysts’ forecasts can be wrong and have been inaccurate in the past. You should do your own research and never invest what you cannot afford to lose.

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