Maersk shares fall over 2% after Morgan Stanley downgrades rating to 'underweight' due to market challenges

From Investing.com: 2024-12-04 08:43:55

Shares of A.P. Moller-Maersk fell over 2% as Morgan Stanley downgraded the Danish shipping giant to “underweight,” citing a container supply and demand imbalance. The brokerage cut Maersk’s price target to DKK 12,200 due to new vessels flooding the market and slowing trade growth, impacting freight rates and financials.

Maersk’s high operational leverage worsens the financial impact of rate fluctuations. The company’s ambitious decarbonization strategy, aimed at achieving net-zero emissions by 2040, has led to increased capital expenditure, keeping free cash flow negative. This, coupled with market overcapacity, weakens Maersk’s pricing power and financial performance.

Morgan Stanley labeled Maersk’s current valuation a “value trap,” citing risks to earnings and insufficient free cash generation amidst heightened spending. The shipping and logistics sector faces challenges of reduced demand and excess capacity, with Maersk particularly vulnerable due to its operational gearing and positioning. Analysts stress limited protection from the company’s net cash position.



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