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Investing.com -- Citi has upgraded AP Moeller - Maersk A/S A (CSE:MAERSKa) to Neutral from Sell on what it describes as “unusually attractive valuation” and a market consensus that implies “unprecedented negativity” in the company’s key Ocean segment.
The Wall Street bank also hiked its price target to Dkr11,093 from Dkr9,500.
While industry fundamentals remain challenging, Citi analyst Arthur Truslove argues that Maersk’s current valuation levels on EV/sales, price-to-book, and EV/invested capital metrics are more depressed than at any point between 2009 and 2019.
“On EV/sales, P/B and EV/IC based valuation approaches, the stock is cheaper than at any stage across 2009-19,” Truslove wrote in a Tuesday note.
Although Maersk still screens expensive on forward price-to-earnings (P/E), the analyst highlights a significant improvement in the company’s financial health, pointing to a swing from $12.5 billion in net debt at the end of 2019 to $6.4 billion in net cash by the end of 2024.
Meanwhile, consensus expectations assume three consecutive years of EBIT losses in Ocean, a scenario not seen even during the Global Financial Crisis (GFC) or the 2015–16 industry downturn.
“Visible Alpha consensus shows an EBIT loss in that division across three years – 2025E, 2026E, and 2027E,” the analysts wrote, adding that the share price appears to price in either a deterioration in Ocean’s structural quality or poor capital allocation by Maersk.
That said, investors may be overlooking signs of structural improvement in the sector. “While we acknowledge market concerns about trade demand and fleet developments, the industry has consolidated in recent years, and we note potential for higher levels of scrapping and idling and greater responsiveness to challenging conditions,” Truslove said.
Still, the analyst acknowledges that demand headwinds and an elevated orderbook—currently at roughly 29% of global fleet—will weigh on performance in 2025 and 2026.
Truslove expects Ocean to return to profitability in 2027, assuming improved supply discipline, higher scrapping levels, and a potential reopening of the Red Sea route.
The next potential catalyst for the stock is Maersk’s Q1 earnings report, scheduled for May 8.