Castor Maritime Inc. (CTRM), which is primarily engaged in the seaborne transportation of a wide range of dry bulk commodities, including iron ore, coal, scrap metal, received a major setback amid the coronavirus pandemic due to travel restrictions and lockdown measures. However, the penny stock, which has a long-term history of share price weakness, hit its all-time high of $1.95 on February 11.

This surge can be attributed primarily to the short squeeze wave because the company’s fundamentals are unconvincing. The stock has lost 6.7% over the past month.

Also, CTRM announced the closing of a $15.30 million senior term loan facility with a reputable European financial institution on January 22, 2021, secured by two of its vessels. The company intends to use the proceeds to support its growth plans. So, we think the stock’s recent surge seems unjustified and unsustainable, with a risk of a decline in the near term given its weak financials.

Here’s what I think could influence CTRM’s performance in the near term:

Immense Volatility due to Short Squeeze

CTRM has been making several vessel acquisitions, but the stock  soared to hit its all-time high of $1.95 on February 11, 2021 primarily because of a short squeeze. Several traders discussed the name on the Reddit platform and decided to buy the company’s stock seeking a temporary gain without seriously evaluating  the company’s fundamentals.

Robinhood  restricted trading in CTRM’s stock at the end of January 2021 to “keep customers informed through market volatility.” Moreover, Robinhood announced on January 28 that it would only allow investors that want to use the trading platform to close positions. It also raised its margin requirements. So, we think it is wise to avoid trading or investing in this stock for now.

Notice from Stock Exchange

CTRM has a long history of share price weakness. The company received a letter from the Nasdaq Stock Market on December 30, 2020 giving it an additional 180-day extension, or until June 28, 2021, to regain compliance with Nasdaq’s minimum bid price requirement. . CTRM can achieve this if the closing bid price of its common shares is $1.00  or higher for at least 10 consecutive business days during the second compliance period.

The company previously  received  written notification from the Nasdaq Stock Market in April 2020 because its stock’s closing bid price was below the minimum $1.00 per share for 30 consecutive business days.

Weak Financials

CTRM’s revenues have increased 124.2% year-over-year to $2.79 million for the quarter ended September 30, 2020, but its net loss was  $580.15 for the quarter. Its  loss per share was $0.0047. Its daily fleet time charter equivalent also decreased 22.4% year-over-year to $8,081 for the quarter and daily vessel operating expenses increased 7.5% year-over-year to $5,348.

Unfavorable POWR Ratings

CTRM has an overall rating of D, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. CTRM has a D grade  for Stability also given its current volatility.

The stock also has a D grade for Value. This is consistent with its trailing-12-month enterprise value/sales of 44.20x, which is significantly higher than the industry average  2.15x.

Click here to access CTRM’s grades for Growth, Momentum, Sentiment and Quality as well.

Of 52 stocks in the C-rated Shipping industry, CTRM is ranked #46.

Better than CTRM: Click here to access 12 top-rated stocks in the same industry.

Bottom Line

The shipping industry, particularly the dry bulk segment, received a major blow  amid the pandemic with economic activity  coming to a temporary halt. As a result, CTRM was also affected, which is  reflected in its weak financials. Despite having no major positive announcements, the stock hit its all-time high on February 11, 2021 due purely to the short squeeze phenomenon. So, we think it is wise to avoid the stock for now as it is quite volatile.

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CTRM shares were trading at $0.95 per share on Wednesday afternoon, down $0.04 (-3.65%). Year-to-date, CTRM has gained 413.51%, versus a 4.26% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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