DRYS) was recently downgraded from Neutral to
Underperform. The downgrade was based on current volatile conditions of the shipping industry.
In the most recent quarter revenue improved on a year over year basis but earnings per share swung from positive to negative. It was the third quarter in a row the company reported a loss and two more quarters of losses are expected.
The dry bulk shipping and oil tanker
industry are facing severe challenges as the vessel rate
collapsed even below the rate during the recession. We
believe the sole reason for this dismal condition is the
sheer increase of vessels under operation that resulted
in intense price competition
We have a long term Underperform recommendation on the stock. Our
target price of $1.50 is based on
approximately 0.16x price to book metric.
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