Castor Maritime Isn’t Just a Meme Play, but It’s Still a High-Risk Proposition

Stock Market

Maybe no news would be good news for Castor Maritime (NASDAQ:CTRM) stock. The dry bulk carrier and tanker drew the attention of the Reddit crowd earlier this year. Strong retail hands are hanging tight, but the volume on CTRM stock shows that many people have fled.

a cargo ship in the middle of the ocean

Source: VladSV / Shutterstock.com

I admit to being among the investors who had never heard of Castor Maritime before being assigned the article. It’s either ironic or timely that I’m writing about Castor Maritime on a day when the drama surrounding the Ever Given is winding down. The first thing I thought about was if they had vessels hung up in the Suez Canal.

Not that it will matter much. Ultimately, demand should still remain strong. In fact, the shipping delays could lead to higher revenue for the entire sector, but investors won’t know the full extent of that story for some time.

What Does Normal Look Like?

Castor Maritime is a young company. It was founded in 2016. That makes trying to get a bead on the stock a little tricky. Because the environment for shipping has been anything but normal since the stock has been publicly trading.

From a shipping standpoint, 2019 was marred by trade disputes, the largest of which was between the United States and China. And then, of course, the novel coronavirus and subsequent Covid-19 pandemic derailed the sector in 2020.

However, 2021 was and still is, expected to be a year of recovery for the sector.

Rahul Sharan, lead research analyst at Drewry, predicts volume for dry bulk shipping to expand by 4.8%. Sharan also predicts that the bulk carrier fleet would only expand by 2.3% in 2021, the lowest increase in capacity since 2000. Castor seems to be challenging that narrative.

The company went on a buying binge during the pandemic and has dramatically increased the size of its fleet.

That is part of the bullish argument for CTRM stock. More shipping volume plus more ships to handle that volume would bode well for the company to add to its revenue. And that’s where I can agree with Louis Navellier in believing Castor Maritime is more than a meme stock.

Even with those positives, the company will have to increase revenue substantially to justify its lofty valuation.

Castor Maritime Is No GameStop

CTRM stock got on the radar when retail investors attempted to pull off a short squeeze-type event in mid-February. Trading volume soared with approximately 700 million shares trading hands. For perspective, the average volume of Castor Maritime prior to the “event” was somewhere between 4 million and 10 million shares.

Now don’t get me wrong. The stock not being GameStop (NYSE:GME) has both a positive and negative connotation. Sure it didn’t soar over 1,000%.

However, CTRM stock may be a stock that has a better fundamental case than the beleaguered video game retailer. And with that in mind, investors may have an idea of where a floor exists for the stock.

Right now, shares seem to be bounding between 65 cents per share and around 88 cents per share. But as Josh Enomoto wrote for InvestorPlace, volume is way down which would not seem to suggest a bullish conviction.

CTRM Stock Remains a Speculative Bet

If Castor Maritime is going to move higher, it’s going to be from the efforts of the Robinhood and Reddit crowd. That’s not a criticism; it’s simply a fact. CTRM stock has virtually no attention from institutional investors at this time.

And in terms of some of the “meme stocks” that have garnered headlines, I can understand why retail investors are looking at Castor Maritime. It’s in a sector that was starting to recover at the end of 2020. And that growth should continue into 2021 and beyond.

That being said, there’s usually a reason why stocks lack attention from institutional investors. Investing on the premise that “this time it’s different” conveys inherent risk. CTRM stock is a speculative bet; whether it’s one worth making is up to you.

On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.

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