Euroseas Analyst Cuts Price Target, Still Sees Almost 100% Upside Courtesy Multi-Year Contracts

  • Maxim Group analyst Tate Sullivan maintained Euroseas Ltd ESEA with a Buy and lowered the price target from $42 to $36.
  • ESEA announced the sale of the 2001-built containership Akinada Bridge for $14.2 million
  • The vessel ended its previous contract at the end of 3Q22 and was undergoing drydock repairs. 
  • ESEA bought the Akinada Bridge vessel in 2017 for $11 million.
  • Based on depreciation since that purchase and potential asset impairments on other vessels amid lower containership rates, Sullivan forecasted a net gain of $3 million from the sale in 1Q23. 
  • The analyst believed ESEA sold the ship to a buyer that would scrap the ship, which Sullivan expected allowed ESEA to sell the ship without incurring high drydocking costs in 4Q22. 
  • Consequently, Sullivan increased the 4Q22 EPS estimate to $2.75 (down 12.1% Y/Y) from $2.27. 
  • Sullivan reduced 2023 and 2024 revenue and EPS estimates.
  • The analyst raised the 3Q23 BV/share forecast but reduced 4Q23. 
  • Sullivan reduced the price target multiple amid higher interest rates and expectations for slower global economic growth. 
  • The analyst maintained a Buy rating as expected ESEA's existing contract coverage would help the company maintain a leverage ratio below 2x while adding nine new containerships, repurchasing shares, and maintaining the quarterly dividend.
  • Price Action: ESEA shares traded lower by 0.8% at $18.55 on the last check Friday.
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