Star Bulk Carriers (NASDAQ: SBLK) stock price has moved sideways in the past few weeks as investors focus on the shipping industry. The shares were trading at $21 on Tuesday, a few points below last month’s high of $21.90. They have jumped by more than 30% from their lowest point in 2023.
Is SBLK a good buy?Star Bulk Carriers has made headlines in the past few months. The biggest news story was the decision to merge with Eagle Bulk Shipping in a deal that will create a behemoth in the dry bulk shipping industry. The combined company will have a combined market cap of over $2.1 billion and annual revenues of over $2.2 billion.
The combined company will have over $420 million in liquidity and lead to at least $50 million in annual cost savings of at least $50 million. It will also be a large company with 169 vessels, which will give it leverage in negotiations.
Broadly, there are several catalysts for Star Bulk Carriers. First, there are signs that demand in the dry bulk industry will continue rising in 2024 if central banks start unwinding their recent rate hikes.
Recent data shows that iron ore prices have continued rising in the past few months as China unveiled stimulus to save its real estate sector. There are also signs that the prices of other metals like copper is starting to rise.
The challenge is that the prices of grains have come under pressure in the past few months. Soybeans and corn, which are mostly transported using these vessels, has continued to retreat.
The other potential catalyst is that the Time Charter Equivalent (TCE) has improved in the past few months. In its most recent results, Star Bulk said that its TCE rate rose to $15,068 and the management believes the rate can hit $17k soon.
The other catalyst for Star Bulk Shipping is that the dry bulk shipping industry’s fleet growth has been a bit muted. In a recent note, Hellenic Shipping said that the fleet grew by just 3% in 2023. Decommissioning has also been increasing, which could boost rates.
Further, the ongoing challenges in the shipping industry, including the woes at the Panama Canal and Red Sea could have a positive impact in terms of pricing.
Star Bulk Shipping stock price forecast
The SBLK share price has been in an uptrend in the past few months. It has rallied from the July 21st low of $16.05 to a high of over $21. In this period, the shares have remained above the 50-day and 100-day Exponential Moving Averages (EMA).
The stock seems to be forming a cup and handle pattern, which is usually a sign of a bullish continuation. Therefore, the stock will likely have a bullish breakout as traders target the upper side of the C&P pattern at $23.78, 14% above the current price. This view will be confirmed if the stock moves above the key resistance point at $21.90, the highest point in December.
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