Wells Fargo: Sell This Shipping Stock on Trade Risks

SSW stock is headed toward its worst quarter since March 2017

Sep 28, 2018 at 11:17 AM
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Wells Fargo chimed in on shipping stocks today, citing headwinds from International Maritime Organization (IMO) fuel regulations and trade risks. Among specific names, the brokerage firm downgraded Seaspan Corporation (NYSE:SSW) to "underperform" from "market perform," and slashed its price target to $5.50 from $8.00 -- matching its March 13 annual low.

In reaction, SSW is down 6.6% at $8, bringing its quarterly loss to 20%. This would mark its worst performance over a three-month period since the first quarter of 2017. Regardless, the shares are still up 18.6% year-to-date, and today's selling appears to be stalling out at the equity's 200-day moving average -- which caught a pullback earlier this month.

seaspan stock daily chart on sept 28

Today's sell-off has volume running hot in SSW's typically quiet options pits. Amid relatively low absolute volume, total options volume is crossing at seven times the expected intraday rate, with 585 puts and 459 calls on the tape so far. Put buyers appear to be buying to open new positions at the October 7.50 strike, while call buyers are targeting the November 10 strike.

Outside of the options pits, short sellers have been reducing their exposure to Seaspan stock. Short interest fell 9.8% in the most recent reporting period to 5 million shares -- a healthy 7.4% of the equity's available float, or 10.8 times the average daily pace of trading.

Meanwhile, seven of the 10 analysts covering the Hong Kong-based name maintain a "hold" or "strong sell" rating. Plus, the average 12-month price target for SSW stock of $8.44 stands at a slim 5.4% premium to current trading levels.


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