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Seanergy Maritime Stock Surges and Crashes; What’s Next?

Sentiment is fickle on Wall Street. Flavor of the day can quickly sour and become yesterday’s leftovers. Case in point: Capesize shipping company Seanergy Maritime (SHIP). Last week, the stock surged by 40%, after capesize shipping rates hit 2020 highs, but gave those gains back on Friday.

Despite the impact of COVID-19 on the globaliron ore trade industry, SHIP reported decent 1Q20 earnings results last week.

Net operating revenue came in at $7.64 million, up 13% year-over-year. Not to mention this figure beat the consensus estimate by $0.34 million. SHIP posted a small bottom line beat, too, with Q1 GAAP EPS of -$0.31, $0.01 above the Street’s call.

So, it is unlikely SHIP shares were sold off following the upbeat quarterly statement. Most likely, shares were sent tumbling when SHIP announced a plan to go ahead with a 1-for-16 reverse stock split, in order to comply with Nasdaq listing regulations. The company had until September 25 to get the share price up to the required $1 minimum listing price, but decided to resolve the matter beforehand. The split will go into effect tomorrow, June 30. Evidently, investors expect shares to sink further once they start trading on a split-adjusted basis.

That said, Seanergy says encouraging steel demand in China, historically low iron ore inventory levels and signs of a recovery in Brazilian iron ore exports are bullish signals for a much stronger capesize market in 2H20.

Maxim analyst Tate Sullivan agrees, and believes the rising shipping rates bode well for the rest of the year.

“Since 1Q20, the average daily TCE (time charter equivalent) rate of the Capesize Index increased to about $29,400, from levels as low as $2,000 in May 2020 during volatile shipping rates as the world adjusted to COVID-19…. We maintain our Buy rating based on our outlook for SHIP to benefit from a rebound in international shipping activity and higher rates,” the analyst said.

Along with the vote of confidence, Sullivan has a $0.30 price target on the stock. Investors could be shipping home an 91% gain, should the analyst’s thesis play out over the coming months. (To watch Sullivan’s track record, click here)

Only one other analyst has chipped in with a review of SHIP over the past three months, also rating the stock a Buy. Therefore, the company gets a Moderate Buy consensus rating. This is accompanied by a $0.40 average price target, which implies potential upside of a strong 155%. (See SHIP stock-price forecast on TipRanks)

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