ZIM Integrated stock price could jump by ~21% if this happens

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ZIM Integrated (NYSE: ZIM) stock price has made a strong recovery in the past few weeks as investors buy the dip. After falling to a low of $16.14 on December 20th, the shares have bounced back by ~44% to trade at $23.58. Still, this recovery is coming from a low base considering that the stock is ~74% below the highest point in 2022.

Shipping concerns drag the stock

The shipping industry had a remarkable performance during the pandemic as demand and prices jumped. Recently, however, the industry is going through major headwinds as demand and prices fall. The average cost of shipping a container has dropped to the lowest level since 2020.

As a result, most shipping companies have published weak results recently. For example, Maersk, the biggest company in the industry published strong financial results for 2022 as EBIT jumped to over $30 billion. However, the company warned that its profit would drop by about 805 this year.

Therefore, there are concerns that smaller players like ZIM, Star Bulk, and Matson, will see lower revenues and profitability this year. In its most recent results, ZIM said that its EBITDA came in at $7.5 billion in 2022, ~14% higher than in the previous year. Its revenue came in at $12.6 billion in 2022 from $10.7 billion a year earlier.

The main concern among ZIM shareholders is that the company will be forced to cut its dividend as business conditions worsen. However, the company reiterated that it will still be profitable this year, with EBITDA set to come in at between $1.8 billion and $2.2 billion. The firm also pointed that freight rates were close to the bottom. The CFO said:

“We also expect our volumes to grow in 2023 as compared to last year, as we receive our newbuild capacity and enable to better optimize outfit. As for banker cost, we expect lower rates this year versus last year.”

Most importantly, the company has a strong balance sheet with over $4.6 billion in cash and zero net leverage. It expects to return between 30% and 50% of its annual income to shareholders. Most importantly, ZIM is highly undervalued since it has a PE ratio of 0.61.

ZIM Integrated stock price forecast

ZIM stock chart by TradingView

The daily chart shows that the ZIM Integrated share price has been in a consolidation phase in the past few days. It remains slightly above the 50-day exponential moving average while the Relative Strength Index (RSI) moved slightly above the neutral point at 50. It seems like the stock has found a strong resistance at $24.68, which is acting as the double-top level.

Therefore, in the near term, there is a likelihood that the stock will remain in this range and even retreat to the neckline at $19.57. 

In the long-term, however, the shares wil likely bounce back and retest the key resistance at $29.09 (November 16 high). This price is ~21% above the current level and will be confirmed if it moves above the double-top at $24.68.

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