- ZIM Integrated Shipping Services’ (ZIM) special dividend event is now out of the way.
- Its fundamentally sound business should support the stock.
- ZIM stock’s sustainable growth will bring another bout of upside this year.
ZIM Integrated Shipping Services (NYSE:ZIM) stock made headlines last month by paying out a whopping $17 dividend to shareholders. The rally into that event was understandably ferocious, but it didn’t last beyond the ex-dividend day.
Since the peak on March 17, ZIM has shed 38% of its value into this week’s low. Luckily and since it had just rallied hard, the disappointment is only on a relative basis. Those who chased it late are will be hurting for a long while.
In full disclosure, I was long call options from $75 and booked them just in time.
Today my argument is that ZIM stock is still interesting from the bullish side. Now that the artificial incentive to buy it has passed, investors can reevaluate the probability of upside from here. And judging by the improvements in its profit-and-lost statement, ZIM is worth holding — especially after this fast-and-furious rout.
There is good news from a technical basis. The harsh correction brought ZIM back to the 2022 breakout base. Usually when stocks fall into such pivotal zones, they find buyers lurking. However, this is not likely to be a sharp line in the sand. It is more likely that the support will extend into a zone stretching towards $52 per share.
In January, ZIM stock bulls established a strong bounce level. From there, it embarked on a 74% rally. At its lowest on Wednesday, the stock fell inside the edges of the January low candle.
|ZIM||ZIM Integrated Shipping Services||$59.79|
ZIM Stock Rang Its Own Bell
They don’t ring bells, but this correction was as close as they come. The post-dividend drop was an inevitable outcome. I did not hesitate to book my win two days early, because I had no doubt of the outcome. This doesn’t mean I don’t like the outlook, but I knew I’d have a scalp opportunity. Now that the $17 madness is out of the way, investors can reengage with profits in pockets.
The business opportunity going forward is attractive enough to drive interest in ZIM stock. Fundamentally, the pandemic changed the way the world operates. Somehow, ZIM positioned itself to benefit from that. Early indication is that this could be sustainable, but there could be some risk. Valuation will not be a detriment to the stock since it has a price-earnings ratio of 1.6.
According to Yahoo Finance, management grew sales somewhat consistently, but then they exploded during the pandemic. Revenues soared from $4 billion to almost $11 billion in one year. At the same time, net income grew nine times to $4.6 billion in 2021. Those are impressive numbers. though we should investigate them for sustainability.
As long as it’s not a one-and-done phenomenon, the long term viability of ZIM looks good. According to Zacks, revenues should grow again this year. Their target is $12.6 billion, which is another 15% higher than 2021. While this is much less impressive than the last surge, it’s still a step forward.
Investors are right to own at least a starter position in ZIM. Future dividend payouts could be a potential magnet. While I don’t expect another $17 whopper, the prior two were still beefy, at $2 or more.
There is a lot to like about ZIM, and very few apparent red flags. Of all the analysts who track ZIM stock, only one has it as underperform. Furthermore they all see upside in the stock price, which is currently 30% below their average target and 5% below their lowest mark.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.