CFRA cuts Maersk stock rating to hold, trims price target

On Thursday, CFRA analyst Jeff Lye adjusted the outlook for AP Moller Maersk (MAERSKB:DC) (OTC: AMKBY (OTC:AMKBY)), downgrading the stock from Buy to Hold, alongside a decrease in the price target to DKK12,800.00 from DKK13,000.00. The revision was based on a new 12-month target price that implies a 2025 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio of 3.5 times. This figure aligns closely with Maersk’s five-year average forward EV/EBITDA of 3.7 times. According to InvestingPro data, the stock currently trades at an EV/EBITDA of 3.1x and a P/E ratio of 6.92x, suggesting attractive valuations relative to historical levels. Analysis from InvestingPro indicates the stock may be undervalued at current levels.

Lye also adjusted the 2025 earnings per share (EPS) forecast to USD39.83 from USD45.00 and introduced a 2026 EPS estimate of USD17.50. The downgrade follows Maersk’s fourth quarter of 2024 performance, which surpassed expectations. Strong momentum and higher freight rates contributed to a significant rise in EBITDA, reaching USD3.6 billion, up from USD0.8 billion in 2023. This surge brought the company’s total EBITDA for 2024 to USD12.1 billion, marking its third-best year on record. InvestingPro analysis shows the company maintains strong financial health with a "GOOD" overall rating, supported by robust cash flow and profitability metrics.

The company’s quarterly free cash flow (FCF) also saw an improvement, climbing to USD2.2 billion. This increase was attributed to benefits from working capital adjustments and a reduction in capital expenditures. Consequently, Maersk’s total net cash position grew year-over-year to USD7.4 billion, up from USD4.7 billion.

In response to the strong financial results, Maersk’s management has proposed a dividend per share of DKK1,220 and announced a share buyback program valued at USD2.0 billion. Despite these positive developments, the CFRA analyst expressed concerns over potential downward pressure on freight rates that could affect earnings in 2025. This anticipated pressure stems from the possible reopening of the Red Sea, leading to the decision to adopt a more cautious stance on the stock.

In other recent news, AP Moller Maersk has been in the spotlight with analysts from Morgan Stanley (NYSE:MS) and BofA Securities providing their latest assessments. Morgan Stanley maintained its Underweight rating on Maersk, keeping the price target steady at DKK12,200. This decision was influenced by the potential short-term nature of stock outperformance and the anticipated downturn in freight rates due to the expected reopening of the Red Sea.

Simultaneously, BofA Securities downgraded Maersk’s stock from Buy to Neutral, decreasing the price target to DKK 12,500 from DKK 15,500. This adjustment was made in light of current ocean spot rates and the projection of a downturn in container freight rates later in 2025. The firm also acknowledged Maersk’s potential to deliver attractive cash returns, particularly with the upcoming fourth-quarter results.

On another note, Morgan Stanley downgraded Maersk’s shares from Equalweight to Underweight, adjusting the price target to DKK12,200 from DKK14,500. The firm cited an anticipated decline in freight rates due to container supply growth expected to significantly exceed demand growth. These developments reflect the current market dynamics and geopolitical factors that could influence freight rates and, consequently, Maersk’s financial performance.

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