ZIM Stock Slips 13.3% in 6 Months: Should You Buy the Dip or Wait?

Shares of ZIM Integrated Shipping ZIM have declined 13.3% over the past six months compared with the Zacks Transportation-Shipping industry’s fall of 8.5%. The stock has lagged the Zacks Transportation sector’s 4.2% slip in the same time frame.

The stock has underperformed industry peers, including Star Bulk Carriers SBLK and Frontline FRO. Shares of Star Bulk Carriers have performed well, gaining 14.6%, while Frontline shares have declined 2.1% over the past six months.

6-Month Price Comparison

The ZIM stock has come under pressure due to ongoing supply chain challenges, rising tariff-related costs and geopolitical woes. The decline after a stupendous 2024 can also be attributed to profit-booking.

Given the pullback in ZIM shares currently, investors might be tempted to snap up the stock. But is this the right time to buy ZIM? Let’s find out.

What’s Keeping ZIM Stock Subdued?

Tariff Tensions: The ongoing trade tension does not bode well for ZIM, as the company has significant exposure to both China and the United States. Transpacific volumes have been suffering due to trade woes hurting ZIM. Agreed that tariff woes are showing signs of easing but in the absence of a long-term trade deal, the scenario will continue to be uncertain. Even on the first-quarter conference call, management sounded cautious regarding transpacific trade during the remainder of 2025 in the absence of a longer-term agreement.

USTR Regulation Threatens ZIM:  The current administration is focused on protectionism, which restricts international trade to benefit domestic industries. The new port fees for Chinese-linked ships under the USTR or U.S. Trade Representative regulation represent a challenge both operationally and financially for ZIM, as more than 50% of its U.S. port calls are made by Chinese-built ships. With a significant proportion of ZIM’s fleet capacity deployed on the Asia-North America trade route, finding alternative deployment options represents a big challenge.

Earnings Estimates Unimpressive for ZIM: The trade tensions are primarily responsible for the year-over-year decline in the 2025 and 2026 earnings estimates for this shipping stock.

High Debt Load: We are concerned about ZIM’s high debt levels. Long-term debt more than doubled to $4.6 billion at first-quarter 2025 end from 2019.

Long-Term Debt to Capitalization

Analyst’s Bearish Outlook on ZIM Stock: The challenges mentioned above prompt analysts to remain pessimistic on ZIM, projecting dim prospects for the shipping company. Based on short-term projections from five analysts, the average price target for ZIM stands at $16.07, representing a 2.7% downside from its last closing price. Broker sentiment toward ZIM remains negative. The company holds an average brokerage recommendation (ABR) of 4.13 on a scale of 1 (Strong Buy) to 5 (Strong Sell), indicating bearish sentiment.

Some Tailwinds for ZIM

Despite the host of challenges mentioned above, ZIM does have some factors working for it.  The shipping company’s high dividend yield is a huge positive for income-seeking investors. In the December quarter, ZIM’s board declared a regular dividend of approximately $382 million or $3.17 per ordinary share.

In the first quarter of 2025, ZIM’s board of directors declared a regular cash dividend of approximately $89 million, or 74 cents per share, reflecting approximately 30% of the quarter’s net income, despite the ongoing uncertainties. The dividend will be paid out on June 9 to its shareholders of record as of June 2, 2025.

Dividend-paying stocks like ZIM offer a stable income stream and are less likely to experience significant price fluctuations. Dividend stocks are safe bets for creating wealth, as the payouts generally act as a hedge against economic uncertainty, like the current scenario.

ZIM’s valuation picture adds to its appeal. ZIM trades at a 12-month forward price-to-sales (P/S) of 0.3X, making it inexpensive compared with industrial levels. ZIM's valuation is also lower than that of Star Bulk Carriers and Frontline. ZIM has a Value Style Score of A.

How Should You Play ZIM Stock Now?

There is no doubt that the stock is attractively valued. The company’s shareholder-friendly initiatives also add to its appeal. However, the tariff-induced economic uncertainty clouds its near-term outlook. High debts also do not help matters.

Given the current uncertainty, it is not advisable to buy this Zacks Rank #3 (Hold) stock now, despite its recent pullback. Investors should monitor the company’s developments closely for an appropriate entry point. For those who already own the stock, it will be prudent to stay invested.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

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This article originally published on Zacks Investment Research (zacks.com).

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