On Friday, Deutsche Bank (ETR:DBKGn) expressed continued confidence in Star Bulk Carriers Corp. (NASDAQ:SBLK), raising the price target on the company's shares to $34 from the previous $24, while retaining a Buy rating.
The firm's analyst highlighted a long-standing bullish stance on Star Bulk, noting the stock's impressive ~432% total return over the past five years, assuming dividends were reinvested, outperforming the S&P 500's 99% return in the same period.
Star Bulk's shares have seen a steady increase from just under $17 in late August 2023 to approximately $24 recently. This uptick is attributed to the improving dry bulk market, as evidenced by a strong first quarter, rising asset values, and higher one-year timecharter rates. In response to these market conditions, Deutsche Bank has revised its outlook, leading to the elevated price target.
The positive adjustment in Star Bulk's valuation is also based on the firm's updated financial model for the company, which now forecasts a significant ~48% increase in the FY24 adjusted EBITDA estimate, from around $417 million to approximately $617 million. This upgrade is due to the company's extensive operational exposure to a spot rate market that is showing signs of improvement.
Deutsche Bank anticipates that Star Bulk could distribute over $4.00 per share in combined quarterly dividends for 2024 and around $3.00 per share in 2025. Based on the closing price of $24.11 yesterday, this would result in an attractive annual dividend yield of 16.5% for the 2024 estimate, while the yield would be around 11% using the new price target of $34.
The analysis and price target do not consider the potential impact of Star Bulk's pending merger with Eagle Bulk Shipping Inc. (NASDAQ: NYSE:EGLE).
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