UBS turns bearish on Maersk as ship glut threatens freight rates, profits

UBS has diminished its outlook for Danish shipping company Maersk, downgrading the stock to "sell" from "neutral" due to anticipated declines in container freight rates and the industry's projected move towards negative profitability by 2028. The firm revised its 12-month price target to kr19,680 from kr17,800, acknowledging more favorable short-term rates and earnings.

However, UBS projects a 18.2% decline in Maersk's stock price over the next year, down from its previous forecast of -16.1%. The brokerage firm predicts a 6-8% overcapacity in the shipping industry between 2027-2029, with the most severe imbalance occurring in 2028, as new vessel deliveries roughly equal to 10-14% of Maersk's fleet outpace demand growth.

UBS expects container freight rates to drop by 23% in 2027, 10% in 2028, and 1% in 2029, and forecasts operating losses for Maersk's ocean division in 2028 and 2029. The company's operating losses are projected to continue through 2030 due to increased ship spending, which UBS estimates between $1 billion and $1.5 billion above industry consensus from 2027 to 2030.

While port congestion in key locations like Shanghai is easing, UBS does not anticipate the market to absorb the influx of new ships. Container capacity in Shanghai's port dropped by 26% from September 16 to October 14, and around 50% of Red Sea services have resumed. The firm highlights potential European protectionism as a risk to demand growth, particularly in China-Europe trade, which constitutes about 15% of ocean carrier volumes.

Despite these challenges, UBS raised its 2026 and 2027 EBITDA estimates for Maersk by 19% and 35% respectively, citing higher ocean freight rates. The brokerage firm projects Maersk's 2026 EBITDA at $18.17 billion, surpassing consensus estimates of $13.6 billion.