Investing.com -- ZIM Integrated Shipping Services saw its stock slide over 2% Wednesday after Jefferies downgraded the company from Buy to Hold, citing recent strong performance and ongoing disruptions at key U.S. ports.
Shares of ZIM surged 160% in 2024, but Jefferies noted the stock is now hovering close to its $25 price target, prompting the downgrade.
"ZIM has been a top performer," the analysts stated, adding, "The shares seem to reflect much of this potential."
The downgrade and share price decline has also coincided with ongoing labor strikes at U.S. East and Gulf Coast ports, where International Longshoremen's Association (ILA) members are negotiating with the U.S. Maritime Alliance (USMX).
Jefferies explained that the strike has led to significant disruptions, with ports handling 50% of U.S. containerized imports and 60% of exports now shut.
While talks continue, the strike’s impact on freight has been severe, and each day of the stoppage will require 6-8 days to clear the backlog when operations resume, according to Jefferies.
Freight rates have softened since their peak in early July but remain elevated compared to 2023. ZIM is expected to report strong third-quarter earnings, with Jefferies forecasting EPS of $6 and a dividend of $1.80 per share.
However, the analysts highlighted that the outlook for ZIM depends heavily on Red Sea shipping routes, which have been disrupted, effectively removing 12% of ship availability.
Given ZIM's strong run and market uncertainties, Jefferies concluded by lowering its rating to Hold but maintained its $25 price target.